I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”

“Fortune does not always smile upon you twice but that is exactly what happened to me. I was not an investor when I bought my west side home in 1998. In 2009, like homeowners all over I watched my home value plummet and my paper wealth evaporate before my eyes. Because of my job situation, and other investments turned sour, I was in a pretty bad spot and considered selling my house, for fear of being completely wiped out. Fortunately, I did not sell and when prices in my neighborhood rebounded to their former highs and then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I listed and sold my place at what in hindsight was pretty much the top of the market for my area. I suffered a little during the following year, anxious that maybe I had made a huge mistake, but now two years later I can comfortably say it was the smartest decision I could have possibly made, and I can’t even begin to describe the feeling of calmness I have these days, as I watch from the sidelines as Vancouver’s RE market crumbles.
I may or may not buy back into my old hood in the future, but if I do it won’t be before prices have dropped at least 40% or more. I’ve even come to think of my action as my own personal way to “short” the Vancouver RE market. And if prices don’t revert to the mean no big deal as there are plenty of other BPOE’s to be discovered elsewhere in this big world. In the meantime I’m renting (wife and kids transitioned just fine), and sitting on a pile of cash until the time is right.
In short, my life is changed forever. Thanks to the unfortunate souls that bought my place; I’ve got big time cash in the bank and zero debt. I have extra money to invest (mostly just cash for now), money to help my kids through university (started), money to travel (done), money to take time off (done), and even money to buy a summer cabin on a lake to take the “edge” off renting (done). If all goes according to plan I should have enough to buy back something comparable to my old house in my old neighborhood, in about 24-30 months according to my best guess. If anybody can identify the downside in this scenario I’d love to hear it.
For the record I’m a regular guy that earns a slightly above average salary. While other homeowners were taking out LOC’s or spending all their monthly earnings in order to enjoy life to the max, I would apply my surplus savings at the end of each month to aggressively pay down my house mortgage and invest in equities. Life was still quite bearable and I didn’t really need all that extra stuff anyhow.
I’m only 50 and I could just about retire if I wanted to now, all because of a single simple decision. I used to think I was a bit of an oddball because I lived below my means. Now it turns out I’m a fucking genius compared to my neighbors. I’m pretty sure only a few will end up as lucky as I have.”

‘Good to be out’ at VREAA 24 Mar 2013 12:54am

1. Congratulations to ‘Good to be out’ for having the good sense to see the mania for what it is, and for having the capacity to act on that realization by selling.
2. Anybody who sells in even the very vague vicinity of the top will end up having done fine.
3. It is not normal, nor good for a society, that an individual should be able to retire at 50 simply via the act of selling his home.
– vreaa

112 responses to “I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”

  1. It is also not normal, nor good, for a society to be so blinded by chronic greed that they communally perpetuate a fictitious economy to maintain an unsustainable status quo.

  2. pricedoutfornow

    And perhaps the person who bought the house will have to work for the next 50 years to pay it off.

    • Why assume the buyer is working? Perhaps “Good to Be Out” can give us the demographic of the person he sold to.

      • Good to be out

        Working couple, both professionals in their late 40’s early 50’s, one kid, no plans to tear down and rebuild. Still need to rent out the basement suite though. And after paying $1.6M I kind of figured they would have rebuilt the garage by now, which was literally collapsing on itself and completely unusable, but so far nothing. Draw you own conclusions.

      • pricedoutfornow

        That’s why I said “perhaps”. You never know.

  3. Renting is the spawn of the devil. Your downside, sir, is eternal damnation.

  4. Congratulations. Enjoy your own personal Freedom 50. As you know, you have capitalized on a once-in-a-generation opportunity.

    Now remember that there is no such thing as having your money *out* of the market: even if you are in cash, that just means that you’re in the currency market. Do you have such high hopes for the Canadian dollar remaining stable and valuable throughout the coming catastrophic half-decade collapse of the Canadian real estate economy? Me neither.

    Once you’ve decided on a secure hedge against currency devaluation and inflation, practice your sympathetic furrow in front of a mirror for use when your friends and relatives tell you about what others have “done to them” and their RE holdings.

    Because when Joe and Mary Lunchpail accidentally spend their way into riding a bubble up, they always take it as empirical proof of their own personal understated financial and life-planning genius. But when they step up to the same roulette wheel and lose their shirts (which a lot of people are about to do, since every house has an owner,) they scream blue murder and blame external forces. Kudos for doing none of those things!

    • “Once you’ve decided on a secure hedge against currency devaluation and inflation…”

      What would be a secure hedge against currency devaluation and inflation in your opinion? Can you offer some examples?

      Thx.

      • From CCP

        http://canadiancouchpotato.com/2011/04/11/living-on-the-hedge/

        I assume the author means some sort of currency hedged investment instruments. With the imminent housing slow down, I’m guessing CAD will devaluate in relationship to USD, ie USD will be more expensive to buy, sort of back to the level before GFC. My guess is currency hedging won’t be a good idea in the future.

      • @ Dave

        Thx. Much appreciated.

      • The best way to hedge against currency devaluation and inflation is to invest in hard assets. Realistically, for the retail investor, gold and real estate, etc.

        The markets have no faith in central banks in the developed economies being able to not devalue their currency and accept some inflation to get their fiscal budget in order. In effect, they are pulling off a Robin Hood. Stealing from the savers and giving the wealth to the borrowers, government included. It is being done in a controlled way so most of us don’t feel it.

        Back to the topic. Between gold and real estate, most choose RE because you can rent it out and generate cash flow and you can borrow against it cheaply. Gold can’t generate an income and diffult to get a loan for to buy, but it is more liquid. This is way gold prices are high and why RE prices are higher.

        Anyway, there’s no sensible way for retail investors to effectively hedge currency and inflation risk. The best way is to be in some inflation linker bonds, multiple uncorrelated currency holdings (CDN, JPY, ISD, GBP), curency trades (but leverage is involved), and real estate. Most individuals don’t have the sophistication or portfolio large enough to truly diversify properly.

        One thing is for sure. Holding cash in savings is almost certain to leave you behind in this environment as the central banks leech the value from you through low rates.

        Here’s a thought. If people think RE is over priced by about 40% now, all the central bank needs to do is keep inflation ticking along at 3% for 10 years which would compound close to 40% (off the top of my head). So if RE prices find a floor soon and stay flat for 10 years then we’re ok!

      • @ BLM

        Thank you very much for your post.

      • @Dave

        ETFs are equities investments. The hedge they talk about pertains to protecting the value of your stock gains once settled in CDN. It’s only a hedge for your investment that is exposed to stocks.

        CDN will stay strong. In a chicken and egg kind of way, it is partly why RE prices are high because foreigners are parking money in CDN to protect value, and if it is in the country, might as well put it in real estate. Getting a loan (whether the buyer needs it or not) acts as a leverage to this investment.

        And why will the CDN remain strong? Because Canada has one of the highest interest rates in the developed world (along with Australia). Meaning investors around the world are putting their money in CDN and collecting much higher interest than they can get back home (Americans are doing this as well). With this much savings in banks, they are then able to issue mortgages very cheaply.

        What would happen if Canada raises interest rates to stem RE prices? Well, more money will pour into Canada to seek the higher interest rates and hence a higher CDN vs other currencies – and those who were in CDN before will have gained both interest and CDN appreciation.

        Canada is in a pickle. Not a fault of its own making. We can say the world is in a currency war at the moment. A race to the bottom.

      • A secure hedge against currency devaluation and inflation is to get invested in farming (of course!). There are fantastic opportunities now arising due to the very large numbers of farmer retirements and the ever growing demands for food of all sorts.

        We are adding 80 million people a year to the planet and most other countries are importers….the biggies like Canada, Europe, Brazil, the US, Australia and Russia do the lions share of exporting to those who cannot feed themselves.

        Your production does not necessarily have to be organic either.

        Cheese production has been stellar four years running in the US making them the worlds number one producer today. Anything wrong with cattle, feed lots or dairies for example? All of these endeavors offer outstanding inflation protection over the long term.

        Milk, meat, eggs, cheese, honey, veggie and fruit produce and processed foods are holding their own against everything. We all gotta eat. Just that simple. Food production usually does well when inflation kicks in and the nice part is that there is a property component for those who love to live on the land.

        One of the most interesting growth areas evolving is in cattle. Some of you may be aware that a large number of aging farmers sold off herds after the credit crisis and as a result, beef (all meats actually) are heading much higher in price. Same with pork. It takes time to rebuild herds and stocks to supply the marketplace. Usually numbered in years except for chicken.

        Speaking of which….Chicken is another area that has shown great numbers these past two years. It beat the pants off the S&P in 2012 for Broiler and egg price growth that’s for sure.

        The downside is you have to live in the country where the internet is crappy and the neighbors are sometimes a little rabid on topics like immigration, gun law, taxes and religion.

        Goes with the territory though.

      • @blm … epic borg assimilation … how about a quickie downside for each? … own risk-free no be … ps. lulu needs zen redirection move such as … http://tinyurl.com/bbj49bm … pffft!

      • Ralph Cramdown

        I’d be rabid too if I lived downwind of a broiler operation.

      • Trust me on this Ralph, pigs are MUCH worse. Makes you want to barf until you adjust. The chickens are pretty hard on the lungs too though. I know I can’t do it. The ammonia gasses in the big houses and all the bird dust are enough to turn a normal human into an asthmatic in no time flat plus your eyes water and head swims from all the allergens. It is enough to put you off chicken for life.

        And that is why God invented ETF’s for agriculture!!

      • Farmer, really appreciate your perspective here. I’m in AGU and POT and am aware of MOO and DBA and a few others (I think MON is evil incarnate, so they are out – I have some standards). Don’t think I could convince the SO to move to a farm but I am interested in arms-length investment in Sask farmland:

        http://assiniboiacapital.com/AssiniboiaCapital/why-invest-in-farmland.html

        Curious to here your opinion. Not investment advice.

      • Real Estate Tsunami

        Farmer,
        Bang on again. Gotta eat, drink and sleep.
        Everything else optional.
        Can’t eat RE and Gold or Stocks.
        My mother who lived on a farm in Germany after the war, always told the story how starving City folks came to the farm and traded in their jewellery for a couple of turnips.

      • Well I will say that the online advertising is on the interesting side for Assiniboia Capital. I loved the blurb there on “Fundamentals of farmland investment” which included (amongst others) that farmland is impossible to steal and that it is a “hard asset” that can never fall to zero. Kind of made me laugh to be honest. Not that they are wrong but the marketing seems targeted to the fear crowd who think the world is about to end.

        Anyway….Saskatchewan farmland is still some of the least expensive on the continent. It has risen considerably in price over the last decade though so that might give you pause. Like all real estate, what goes up must also come down.

        All I can tell you for sure is that it is getting awfully thin on the ground there where people are concerned. All the little farms are being bought up by rich neighbors and the squabbling over small parcels gets epic at times.

        I mean a real soap opera.

        There is quite a bit of animosity between neighbors who used to be good friends on this issue. Every quarter section that comes up informally is sought after by those with more capital than the sellers and there is resentments between neighbors over who eventually buys it.

        The farms are getting bigger bit by bit. Some run 20,30 or 40 sections and more. Whole Townships are just a single farm these days and the little guys are getting squeezed out since they can’t compete unless they specialize.

        Lots of farm equipment on the block too. Nobody wants the little stuff anymore. It is too small for the big operations so it goes dirt cheap at auction unless it is hobby farm size and in good shape.

        You should go out there and talk to people before you buy anything. That is my only advice. Canadian farming has gone corporate now. It is an industry run by money from trusts and the like. There is almost no Mom and Pop farms that are succeeding like the big players anymore.

        Even the labour is imported from Mexico now………

      • I like gold, but I don’t view it as much of an inflation hedge. For a pure inflation hedge, I think Farmer is right on target with farmland.

      • Good to be out

        Farmer,

        I have thought about a number of alternative investments, including farming – for all the reasons you mention.

        With respect to these retiring farmer opportunities where do you consider the best opportunities to be. Are we talking BC, somewhere else in Canada, or elsewhere? And when would the best time to jump in be; right now or in a couple of years. Is farm land high or low priced at the moment and what direction is it headed? Those are pretty broad question but any comments would be appreciated.

        I am a down to earth kind of person with a good work ethic and believe in the value of physical labour, so a little farm plot where I can grow my own food and enjoy a more relaxed pace of life has a lot of appeal to me right now. While it’s true I grew up in the city, my work and travel has exposed me to rural living and lifestyles in many different countries, and has really opened my eyes to how the other half lives. I have no false illusions about farming being some sort of utopian dream. It’s hard work!

      • Farmer,
        You piqued my interest in farming as the ideal currency devaluation and inflation hedge, citing how well your farmer colleagues have done for themselves, upcoming retirements amongst a generation of farmers, we all gotta eat etc… But then you say “Canadian farming has gone corporate now. It is an industry run by money from trusts and the like. There is almost no Mom and Pop farms that are succeeding like the big players anymore. Even the labour is imported from Mexico now”. So actually are you suggesting the hedge is to invest in the corporates rather than directly engaging in agricultural activities?

      • The nitty-gritty of running an agriculture business is not for everyone. The liquidity of agriculture assets are multiple times less liquid than residential real estate, generally speaking.

        Technology in livestock and gm harvesting can make farmland value volatile too.

        Farmer goes on to say ETFs are the way to go but I disagree. If one invests in an agribusiness ETF, it is effectively investing in the business to get a piece of the future cashflow of the company that manages the agribusiness. Meaning, you are buying into a bundle of stocks in a growth sector. The hard assets of the agribusiness is not what you’re buying into, which is where the true storage of wealth / hedge is.

        Without complicating things, basically agribusiness ETFs are:

        – a business, like buying into several publicly listed commercial urinal cleaning company knowing more office buildings are going up in a city, meaning more urinals for these businesses to maintain.
        – it is no more a hedge to inflation than buying into the stock of P&G who you know will raise personal hygiene product prices along with inflation. (livestock is unlikely to increase in value faster than inflation)

        To really hedge against inflation with agribusiness, you need to own farmland (which by the way is probably a good investment for someone with deep pockets and knowledge of the industry but not realistic for a regular city folk).

        Just remember, the business and the assets are two different things here from an investment point of view.

      • Well you make good points, Curious. There is an obvious conflict between my various comments as some represent observations of daily reality and others are more bland acknowledgements of the difficulties that are apparent right now.

        Land prices are too high if you are anywhere near commuting distance to a city like Regina or Saskatoon. You cannot make money grain farming if you buy now as a general rule so the time to be investing in that land was when nobody wanted it and commodity prices were still low.

        That time has passed.

        That being said there are still opportunities to take over existing farms including all the equipment for fair prices. You would have to be very targeted in what you raised though and there is always going to be capital required for a new entry.

        It is why I mentioned feedlots as one alternative as they are intensive on small land and so have better odds of profitability. Beekeeping is another as no land purchase is required in most cases and the bees are most welcome on any farm needing pollination services. These guys have the best of all worlds as the price of honey and wax has been very good and as the product is essentially sugar it functions like a commodity that keeps ahead of inflation.

        The only guy I knew who went broke with bees was one who lost all his hives to colony collapse disorder and then got divorced. Otherwise there is insurance and most good managers can survive a bad year here and there.

        What others are doing is small scale intensive stuff like starting tree farms, organic market gardens, raising flowers in greenhouses (just glorified plastic shelters that are not that expensive to build) and raising poultry. Anyone can raise birds below the numbers set by quota and prices are very good if the birds are free-range organic.

        Cost of entry into something like a dairy or grass fed cattle operation are quite a bit different though and the price of quota in the case of a milk herd is prohibitive although these guys have also done very, very well where they managed their herds professionally.

        I think the bottom line for anyone younger trying to start out is to specialize in one area while limiting land purchases. Leasing is the better way to go and cropshares in other cases so the landowner has a stake in your success (which means he will be anxious to see you succeed and will have plenty of good advice to offer and that is a big plus if you are not actually a farmer yourself!!)

        I also mentioned cheese production. This has seen tremendous growth and the business looks to me to be a good one. Cheese is one product that has good growth fundamentals behind it and now that the Chinese have developed a taste for the stuff it is sure to keep percolating for years to come.

        Basically what I am seeing is that the desire for protein is rising strongly as the developing world joins the West in demanding higher quality foods. That means that anything from milk to meat to eggs and the whole gamut of dairy products and processed proteins have a great future. The opportunity lies on the intensive side though and not on land tracts that are clearly out of reach of mere mortals these days.

        I mean the days of mixed farming where a guy has chickens and cows and some pigs and a garden and the kitchen sink are long gone. You will go broke doing that guaranteed. So those are my thoughts today on what you can do with your Vancouver housing dividends if you were lucky enough to sell at the top.

      • Sorry Curious….I never answered your question. If you are young and healthy the money to be made is in farming for yourself, not necessarily in the finacial instruments that are on offer. I don’t really know if this is even a story worth telling but what I am seeing is that farmers are doing very well right now. The best of all worlds. High commodity prices, outstanding tax incentives, subsidies and Federal benefits, free training in some cases, support from all levels of government and markets that are open and willing. Just research the opportunities and choose one that suits you best. It sure beats the hell out of sitting in front of a computer screen all day surrounded by a bunch of idiot coworkers stresssing you about how much their house is worth! In no time you will be on a horse giving the bird to the old life you left behind and with luck and good business sense will be fattening your bank account and enjoying more personal freedom.

        Isn’t that what it is all about?

      • BLM: That 3% inflation would be relevant to RE prices only if salaries and wages were inflating by 3% a year. They won’t be doing that in BC or Canada. But if they were to do so, it would be in an environment where interest rates were moving toward normal (which they may do anyway.) That would bring down RE prices. Also, in relation to another comment of yours in this thread: I wouldn’t pay 700K for a carelessly built, undersized, large-carrying-cost condo on a busy street in a third-rate city (i.e. a Vancouver condo at current prices) because it’s not worth it. And it’s certainly not a hedge against inflation: a new Vancouver condo at today’s prices will not return to its current “value,” in real and possibly in nominal terms, in the forseeable, independent-living lifetime of someone who is now in their 50s.

      • Canis: 3% is within Bank of Canada’s target (www.bankofcanada.ca/monetary-policy-introduction/framework/inflation-control-target). One must think with all the central bank monetary easing around the world that inflation will eventually catch up. In fact, it has, but the way inflation is calculated just doesn’t show how severe it is.

        What if the pipelines up North switch on? That would be a huge boost for growth.

        And if Canada’s economy recovers well ahead of the US and Europe and rates go up, would we not see more foreign money being parked in Canada? As is proven, when there is money parked in the bank (liquidity) asset prices tend to go up. All the foreign money in Canada RE now would also have gained even if prices drop 10% but CDN goes up 15%.

        The current market is rigged for some but a boon for others. Always two sides to a situation.

      • Thank you for your perspectives, Farmer. Very much appreciated.

      • “Blessed are the CheeseMakers!”

      • Thanks for your kind comments, Catherine. I don’t really know that these thoughts of mine are of much value to anyone even though there was a positive reaction to my posts.

        These are merely observations I have made over the past few years. I believe I have spotted the beginnings of a new trend in agriculture and one that is certain to grow in importance over the coming years.

        But it surely is not for everyone.

        Even though most of the guys I know who are actually still farming actively are in their mid Fifties and Sixties it really is an occupation choice for younger people. The older guys mostly just tough it out without the support of their kids because it is the only life they know.

        Many are talking about cashing in though. Land prices are high, yields have been very solid (even spectacular for a few!), market prices are excellent and so they are at the very top of their game.

        You can see it in their eyes……something else is ticking….the marbles are turning over……they know from a lifetime in the business that farming can be fickle……

        Maybe getting out at the top is a good idea.

        I know from listening to them that a lot of very good farms are coming to the market in the next decade. I wondered before if this was a story worth telling and after giving it more thought have concluded it may actually be a very important one where trends, demographics of workers, high value processing and our food supply merges.

        Are you a farm girl by any chance or someone thinking of changing your life and heading back to the land? I think it is a great idea if you have your health, an inspired outlook, some good ideas and capital to invest.

        Probably my last comment here on farming. I think I have driven our kind host around the bend discussing topics totally unrelated to Vancouver R/E. (but I never mentioned that barbaric golden relic even once!)

        Cheers

    • Good to be out

      Thanks everybody for all for your thoughtful and constructive comments. Perhaps a few follow up comments are in order. Believe me, I have played out many different scenarios in my mind as to where things go from here, and like a few of you have suggested that has become a whole new challenge in itself.
      As many of you have commented, just sitting on cash earning minimum interest is the safe bet but subject to creeping inflation. My feeling on that is that houses are priced in nominal dollars so as long as RE prices go down I am “making” money. I have considered the possibility that if house prices deteriorate more slowly over say 5 years and inflation pushes up the mean reversion price line, resulting in less than the 40-50% price decline predicted by many on this site. If the inflation scenario does start playing out we may be forced to make a decision to either jump back in (I still think owning a house in a low risk environment is preferable to renting if you think you will live there for a while). On the other hand, I have travelled extensively for both work and pleasure (40 countries and counting). As a result I have spent considerable time in very liveable places that I would consider living short term or long term, so worst case scenario of being “priced out forever” in Vancouver is living in one or many other really nice places, preferably where it does not rain as much.
      Of course there are many strategies to earn a higher return on my money but these all involve a commensurate increase in risk, or at least risk in the sense of potential for loss of capital, which could be devastating in my case. I have two trains of thought that have kept me on the sidelines for now. I believe the current global debt situation is unsustainable over the long term, and that there will continue to be “Cyprus-like” events for some time to come. We live in a highly leveraged global economy and our financial system is built on a house of cards that requires only a small spark to set off a potential crisis or even collapse. Maybe central banks can rescue this situation via some draconian measures on a global scale if and when such an event occurs, or maybe not. Then of course there is debt monetization by central banks around the world; the more benign means of simultaneously inflating stock prices and robbing regular savers through inflation. In principle I like Garth Turner’s strategy for a diversified investment portfolio, but depending on whom else you want to believe, and I have read many, stocks and bonds are either way undervalued or way overvalued. My personal feeling is that the latter is more likely, though I’m often haunted by the “don’t fight the fed” kind of argument made by so many.
      Regarding hedges I already have fairly significant exposure to PM’s which have done pretty well over the years (some good years others not). Also, the cabin I purchased in the US was a distressed sale that I bought at 60k but was assessed at well over 100k. A similar property on the BC side would have cost 500k, I kid you not! Also, as a dual citizen so I can renovate, live full time, rent out, or sell without the complications that a foreigner will encounter. This property for me, apart from being a wonderful weekend escape from the city is also an RE investment bought at the bottom of the US cycle. That makes it a hard asset with minimal downside price pressure and is also a hedge against the CAD. I agree that the Canadian dollar could get much weaker over the next few years, and the USD is probably the least ugly fiat alternative, especially in times of crisis.
      I guess my concluding thoughts are that this is definitely not a time for Canadians to hold illiquid assets, or to have all one’s eggs in one basket, or be in debt, at least for us little guys. A hundred grand used to be a lot of money. I suspect it will be again fairly soon.

  5. Froogle Scott

    “If all goes according to plan I should have enough to buy back something comparable to my old house in my old neighborhood, in about 24-30 months according to my best guess. If anybody can identify the downside in this scenario I’d love to hear it.”

    I think it’s quite likely that Vancouver RE will experience a significant price decline. A 40% reduction wouldn’t surprise me, although predictions of this sort must be considered to have a wide margin of error. It’s somewhat less likely that the timeline associated with any serious decline will proceed according to any sort of plan, or be orderly. It’s more likely to be disorderly — perhaps periods of sharp drops, interspersed with rebounds, periods of slower grinds downward, or sideways price movement.

    A two- to two-and-a-half-year time frame for a crash to be all over and done with, and a return to fundamentals reasserted, feels a bit quick to me. Previous bubbles in Vancouver have taken half a decade to unwind. That’s not to say our current bizarre situation will necessarily follow any previous pattern. So the only downside may be chomping at the bit to get back into a market that stubbornly refuses to follow someone’s personal timeline and life plans.

    “Good to be out”, you also say: “And if prices don’t revert to the mean no big deal as there are plenty of other BPOE’s to be discovered elsewhere in this big world.” That’s probably the advice to yourself that’s the most valuable. If you truly heed it, it should help you exercise patience.

    • I’m in agreement with Froogle that it’s extremely hard to predict with any certainty the trajectory that price weakness may take. And thus very unwise to be someone on the sideline holding one’s breath with a time-limit on buying in (or back-in).
      I suspect some years will show big chunks off (up to 20%), others will grind sideways. And I’m not anticipating a final real trough for years.
      Of course, as prices drop, downside risk diminishes.
      Like timing a top, it’s impossible to time a bottom.
      And, similarly, one doesn’t have to… Someone like GTBOut only has to buy in the very vague vicinity of a bottom to have done fine.
      The perpetual irony of the markets is that it’s so hard to do what is in theory so straightforward: sell when others are buying and buy when others are selling.

    • Good to be out

      Froogle:

      You are correct. My 24-30 month buyback scenario is predicated on two things: firstly that we seem to be tracking Miami RE price declines as per the US correction, the second is that that number suits me in terms of what is going on in my life. Of course things may not play out this way, and there was for sure a little wishful thinking thrown in to the mix. I guess I should have mentioned this.

      • Real Estate Tsunami

        Good to be out!
        My advise would be: Get out of the BPOE for a while. Take a vacation, spent some of the money. Relax.
        Stop fretting about RE in Vancouver. Vancouver is not the World.
        I’m in Berlin right now. Most people are renting.
        It’s cold and windy, but sunny and people are sitting outside sipping coffee.
        I’m trying hard, but I’ve yet to find any RE related article in any of the German papers.
        Maybe Nem can help out.

      • BPOE…. Just talked to a neighbour who’s son moved to Vienna a couple years ago from here. Never coming home now, has a good job and a good life there. Said his son thinks Vancouver is too boring…. Not that I ever thought Vancouver was on par with Vienna, but I was a bit shocked at how he described how much more his son likes Vienna over Vancouver…. It was like Vancouver was a little one-horse town the way things were described by him.

      • “We want every estate agent and every apartment management company to be aware that if they try to rent out flats at rip-off prices, they can expect a visit from us.” – Dennis, der nackte Deutsch Miete Demonstranten!

        [UK Independent] – The cheek of it… Berliners strip in protest at city’s sky-high rents

        …The movement is sending shock waves through the normally orderly world of Berlin estate agents: when they show off apartments for rent, their presumed tenants strip off and prance around wearing nothing but Mickey Mouse masks to hide their identities.

        The protesters, who paint their naked bodies with slogans such as “too expensive” and “rip off”, pose as ordinary would-be tenants and queue up to “view” expensive apartments to let.

        Once inside they strip off and dance around to blaring music pumped through loudspeakers while being filmed. In most cases they manage to flee before the police arrive. A video of their protest usually appears on YouTube the following day.”…

        http://tinyurl.com/35e4ycz

        [NoteToEd: Finally, an ‘OpenHouse’ event worth attending…]

  6. Congratulation on the author for jumping to the sideline right at the peak of the market, whether by sheer luck or insights. Yet he’s also contemplating jumping back into the RE market at the bottom, and here is where I have a bit of trouble understanding him.

    He has enough liquidity to retire at 50, no debt and mortgage, and a lot of freedom to pursuit his hobbies, ie travel. Kids are going to university and they don’t need any adult supervision, this is now the best time to travel. Renting a house is the most logical choice from my view, as he can live in various places and countries over the coming years. Renting gives your the freedom to move, to decide on a whim to perhaps live in Montreal for a year to enjoy the Francophone side of Canada, or go overseas to live in a small village in France if you love wine, or Thailand or Vietnam to experience the difference from our Western culture.

    The author wrote that he’s done with traveling. I’m not sure if he meant he cannot travel anymore due to health, a valid reason, or that he has already visited places that he has always dreamt of and that he doesn’t see any reason to travel anymore, akin to people who proudly proclaimed that they have visited Paris, London or Berlin, and no longer sees the need to see the rest of Europe.

    I see the author still has the same mindset as the 99% of people in Vancouver, that RE represents some form of security, and that jumping back into the RE market in the future is the only option. He has liquidity that gives him financial freedom, and I don’t see a reason to waste it away on another particle board house in Van.

    • Good to be out

      Dave:
      My health is just fine and where did I say I’m done with travelling? To the contrary I am a traveller for life. I’m also not a proclaimer when it comes to travel, mostly because my experiences (mostly through work) have been so unique that they are lost on the typical “world” traveller.

      My mindset on housing is not the same as the other 99%. There are all sorts of intangibles that make home ownership worthwhile. One of them for me was gardening, and another was throwing parties with 60-70 invited guests. Buying a house using leverage when a house costs 200% of its fundamental value will turn out to be financial suicide for many people; buying at 110-120% of fundamental value with cash (and with cash left over) is not, at least in my opinion. People have been owning their homes since the first cave was inhabited.

      I re-adjust my thinking about everything, not just RE, on a timely basis. I may or MAY NOT re-enter the market at a future time and it will depend on the circumstances at that time. In the meantime I’m including a healthy dose of wishful thinking. Did not mean to mislead in that respect.

      • Good to be out

        Oops, I meant to say buying at 10-20% over fundamental value …

      • @Good to be out. I just re-read your post, and I have to apologize for my mistake. I thought you were done with traveling, when in fact you wrote you have “money to travel (done)”.

        I see your point about having your own humble abode, especially if you enjoy the benefits of gardening and throwing your own party. It’s good that you’re keeping your options open about whether or not you want to jump back into RE, we need more rational people in Vancouver.

        Best of luck with your decision about how best to use your money.

  7. I doubt the market will unwind in a couple years. It will take years for the market to unwind, although we do see drops of 20-30% below assessed in Richmond and Van West/West Van right now, the huge run-up over the past 10 years means you really need about a 60-80% drop to really qualify as a “crash”. Remember, going from 1M->1.5M is a 50% increase, but going back from 1.5M->1M is “only” a 33% drop. Thus, if you’re looking at going back to pre-boom days, think big percentage drops.

    I think it’s a wise choice to rent… you have a lot of liquidity in your assets in cash. Invest wisely and you’ll be even wealthier in a few years.

    • Invest in what that would be much safer than RE?

      • Only a fool thinks RE is safe right now. All I gotta say is look at the US. And don’t repeat the RE mantra that our banks are more conservative and a US style correction can never happen here. It can and will. Canadian debt loads are at record levels now.

      • True, but maybe asking what else to invest in will point to why RE prices are so stubbornly high.

        Record high debt is contributed by both speculators and those who can afford to pay in full but choose to mortgage because rates are pretty much at par with inflation. (Free money)

        I’m not advocating RE is necessarily a buy.

      • We’ve tended to encourage chat here to confine itself to ‘Vancouver RE vs cash’.
        Limiting, I know; perhaps overly so. But that is the analysis that will make most sense to most participants. Of course, the moment we even discuss ‘real’ prices over ‘nominal’ prices, we’re already talking about other factors (in that case, inflation).
        But the alternative is to become an in-depth investment blog, which is not our focus. Witness our recent exchanges with Farmer on this issue (he’d made very fair comment re alternative investments to RE).
        Regardless, if one is out of the RE market and considering hedging against simply holding cash, best to consider assets that are at fair value or less. Even though hard assets may traditionally do well in periods of inflation, hard assets that are already sorely overvalued will not act as such a hedge.

      • Farming BLM. Every one of the guys I know who are actively farming have been having terrific years these past few and it shows no signs of letting up anytime soon. Not one has less than a million in cash and assets. Not even one. You sure don’t hear them talking about it in public either. As usual they cry like babies when they have a bad year but they shut the hell up when they are doing well. Not everything is making money of course but for those who brought in decent crops the payments exceeded expectations by a wide margin.

        Maybe those are the guys buying all the Coal Harbour Condos!!!

      • I think that the question should be: Where else can you invest with leverage of 20 to 1 and at sub-3% interest? This is also an asset that carries charges (taxes, maintenance) and a cash-out charge, not to mention long periods of illiquidity….

      • @ LJ Nowhere can you invest with that sort of advantage. That’s why now RE is the riskiest of all asset. Hard assets have no way to improve their income, except being a landlord (or slum lord), but then you’d have to either be the building manager and fix everything yourself, or hire a management company, too much headache. I still see RE as not an investment vehicle but a roof over my head.

      • Farmer, I will add that the anecdotal info I’ve heard about aging farmers, is that they tend to move into crops (as opposed to livestock) so they can escape to Hawaii/Arizona for a few months in the winter. Can’t say I blame them.

      • True enough Blammo. That is indeed what a lot of them are doing. Motorhomes are the most popular way to go. Plenty of them have kids that won’t touch the tools unless they really get their arms twisted during planting and harvest. So the oldsters just pack up in the fall and head South. Leave the house open too and the places vacant which is not that bright but that’s the way they are. The kids are mostly elsewhere anyway. In trades, the oilpatch, odd one has turned professional and lives in the city. I only know a few that have a genuine interest in sticking with the farm despite all the opportunity. Hardly anyone seems to want livestock anymore. It just ties you down so much. The beekeepers seem to have the best gig of everyone and they are making a damned fortune. The bees only fly for 6 or 7 months and then they get boxed up in batts of insulation for winter and so away they go to warmer climates for relaxation in Texas or Florida or Nevada to spend all the loot. If I was younger I might give it a try myself but the arthritis is setting in a bit now. Who would have thought you could make a million cash with bees in ten years or less? I was surely in the wrong occupation.

      • “I mean a real soap opera… There is quite a bit of animosity between neighbors who used to be good friends on this issue… Whole Townships are just a single farm these days and the little guys are getting squeezed out since they can’t compete unless they specialize… Canadian farming has gone corporate now.”… – ElGranjeroElberTah

        ThankYouSoMuch, Farmer… PricelessHUMINT. Very helpful for my MicroWork [BootsOnTheGround are infinitely preferable to EyeInTheSky/OSINT]… You’re a DiamondGeezer. If, perchance, ‘Lucillle’ ever tires of farm life – and you find yourself compelled to placate with her with a CoalHarbourRefuge… WellThen…

        TeeHee!…

        [NoteToFarmer: HopWilson also wrote, “A Good Woman Is Hard To Find”… So try to keep on her the Back40]

  8. WellPlayed, GoodToBeOut!… but whatever you do, may I humbly suggest that you pass on properties in either of Beijing’s “FunCity” or Shanghai’s “LotusRiverside”…

    “There is a movement toward compliance with international building codes and standards… But implementation and oversight remain extremely variable.” – Stephen Hammer, Massachusetts Institute of Technology, Energy Planning Lecturer, China/Hand

    [BloomBergBizWeek] – The Cracks in China’s Shiny Buildings

    …”Nearly every month brings news of an infrastructure failure, dramatic or mundane. In August a new $300 million eight-lane suspension bridge in Harbin collapsed, sending four trucks tumbling and leaving three dead. In 2009 a nearly completed building in Shanghai toppled like a domino because its foundation was inadequate. The U.K.’s Telegraph reported that within months of opening last year, the $210 million Guangzhou Opera House began to shed its glass window panels and developed large cracks in its ceiling. Last year writer Evan Osnos chronicled on his New Yorker blog the premature decline of his courtyard house: “When the rainy season hit Beijing, our house began to show its age. About four years old, to be precise.”…

    http://tinyurl.com/c6dlayo

    [NoteToEd: An OldyButGoody… and doubtless, SweetRevenge for countless Shanghai MotherInLaws whose daughters BrowBeat their husbands into GoingAll-In on alternative properties in ‘NoFunCity’ and the ParachuteLifestyle.]

    • The actual situation on the ground is probably a lot worse than what you reported here, though at least in China, big profile disasters for public projects can also mean serious jail time or even a death penalty since politicians sometimes do have to sacrifice a monkey to placate the chickens as the Chinese saying goes.

      With regards to the mother-in-law, often it really is the mother whose hellbent on having not only their son-in-law but the son-in-law family to go 100%+ all in on housing to “provide a good future” for their daughter. Social order is getting absolutely atrocious in China as everything/everyone is about $$ all the time. The pressure is immense. To be a common man in times like this in China is to be like a common guard soldier living in the Warhammer 40K university……

      • It’s actually to kill a chicken to scare the monkey, the other way around. I like your analogy between a common man and a common guard in the Warhammer universe.

      • Ah yes… WarHammer… things have moved on a bit since RISK…

        [NoteToEd: Real WarGames are more ‘fun’… rather like Blondes.]

      • There is the saying to kill chicken to scare the monkey but there is also the colloary of sometimes you have to kill a monkey to placate a pack of chickens. 🙂 Think about it Dave….it’s actually a valid good suggestion.

    • Not that I know much about it but you have
      1) society introduced to mass property ownership only 15 years ago, leading to
      1a) lack of enforced building codes
      1b) little understanding of total ownership costs over depreciated schedule
      1c) little coordination or planning for capital maintenance

      and I don’t think there should be too much surprise about future surprises.

      • Ralph Cramdown

        Are we still talking about China, or about condo ownership in major Canadian cities?

  9. Carioca Canuck

    To the OP headlined in the thread…………”Welcome to the club !!”…………

    Unlike you, my wife and I didn’t own a home, but we did everything else that you did. We saved money every single chance we got, lived below our means and eschewed debt. In the last 11 years we have accumulated a mid six figure cash balance…………all while be “evil renters”.

    We’ve got no plans to purchase real estate either, regardless fo how far it drops in price.

  10. I was born in 81 and if I was born in 71 I could have bought a house on the wages my company paid in 2003 in Vancouver.
    Boomers who own think I am entitled. I don’t even want a house just a place of my own without spending 92% of my income.

    • Yours is a modern day lament, Mt Pleasant. I really feel for you to be honest. The admission price to home ownership today is just so high in many parts of the Lower Mainland that there is barely a precedent by which to compare.

      I am not even sure it will resolve itself in your favour in the near future either. This could be a long wait and even then the trend is bleak if you have not made a grand effort to save enough for a healthy down payment.

      In the past we discussed the potential for a “crash” in prices but that really is not likely anymore except in a few pockets like Richmond, Victoria and Kelowna. A slow moving deflation in prices back to fundammentals is the preferred course but that suggests your wait could be 10 years or more.

      My sense is that the end of low interest rates will be one of the triggers that brings some sanity back to Canadian housing markets. We will be waiting for any announcement from the Fed that it may curtail or withdraw from its various bond buying programs as early as this fall.

      They have stated that intervention will not end until employment numbers hit 6.5% again and it looks to me like the trajectory could take the US there within a year if confidence keeps rising and housing continues to show signs of life. Official unemployment currently stands at 7.7% there so the gap to close is not that large anymore.

      Just one busy Summer will do the trick.

      So this Summers numbers will be telling and early indicators suggest it is already looking like the year will come up nicely positive. Capacity Utilization rates are near their long term average already so the economy is warm but not even close to overheated.

      I think everyone acknowledges that the Fed would very much like to get out of the business of propping the economy. After more than 4 years of extraordinary intervention an exit may finally be possible. But of course, that means that interest rates will slowly begin to inch up as the economy expands. Good for the US….good for Canada too.

      As I mentioned before though, if there is improvements in the US economy and employment numbers remain stable in Canada as a partial outcome of bouyancy in the States then housing prices will probably not fall too rapidly (much to the disgust of all the bears).

      That could mean a flattish market for a long time and no crisis in housing anywhere near what our American friends experienced (my vote goes for that outcome).

      If I were you I would just dig in and start saving as best you can now. There could be a very long wait before sanity prevails in the Vancouver housing market again and your entry will be limited by what you can bring to the table when the buying bug finally hits you.

      • Realtor behavior

        True, RE is not gonna crash soon enough for people lurking to buy, it will only crash hard enough when most people don’t want to or feel it worth to buy, especially when most people are already heavily-invested. Having said that, I believe those leaking macmansions in the west side will still be the exceptions; however, 3 millions with 60+% drop still worth over a million.

  11. I wonder how many readers would have called this guy an idiot for not selling in 2009 while he still had time to avoid an imminent crash.

    • The old line attributed to various very wealthy businessmen of an ealier epoch, such as Bernard Baruch or Baron Rothschild, when asked why he was so rich: “I sold too soon.”

  12. Real Estate Tsunami

    Guess what?
    Took a Taxi in Berlin today. The driver quoted me €12 and it came to €11.
    My hotel room was €60, and that’s what they charged me on my Credit Card.
    Go and eat out, no tips, no HST. Everything is included.
    Simple.

  13. I would agree with the call for a significant depreciation of real estate here in the the lower mainland.

    However properties are selling quickly down here in W. Rock these last few weeks. Now most properties are going for what would be considered lot value. However the activity among South Asian builders/developers is very,very strong.

    Thoughts?

    Thank you.

    • The segment of the West Side market I follow closely is much the same. Reasonably priced places seem to be moving, not that there are a lot of them. And “reasonably priced” is only in terms of recent prices. I guess it should not be surprising. There is always some demand and right now I think some sellers are just trying to move their property rather than get rich off it.
      I am a bit surprised to hear about the South Asian builders. A friend was telling me about a mutual friend who is a small builder and works with a lot of South Asian builders. He is apparently quickly becoming as much a landlord as a builder as some of their properties are not selling, so they are renting instead. We wondered how long he could continue to carry these properties as we doubt the cash flow is adequate. I suppose as long as interest rates stay low builders can carry more properties but that can only go on for so long.

    • Hmmm, have you looked at the Feb. stats? They are avail. on the realtylink web-site. Sometimes it looks like the sales are strong but in reality they aren’t and are below the averages. I saw some sales for Richmond and felt the same – like more activity than I expected – but then I reviewed the stats and it was not the case, just probably my own expectations that there would not be any sales at that price point – the prices are walling, who would bother to buy now. Looked at the properties sold – all of them are the very old houses on the bigger lots, developers buying the land supply. Also lots of boomers in W.Rocks and they started to lower their prices to sell.
      Look at any graph of the housing bubble unwinding route elsewhere when it starting to deflate, there are always few smaller bumps up on the way down – when people are thinking that may be it is a time to buy already and get it.

  14. Manhattan is 80% renters , they cant sleep at night worrying that that they dont own in super awesome Vancouver

  15. Thankyou Pdub.

    I do notice that two of the recent acquisitions have for rent signs in the window.

    Cheers.

  16. Good To Be Out: In one place you say you made a huge capital gain tax-free; in another you say you are a dual citizen, apparently of the US and Canada. While any gains on one’s primary residence are tax-free in Canada, there are limits on this exemption in US tax law. The timing and location of your buying and selling suggest to me that your gain was well over your (and your spouse’s) exemption. So, you owed some capital gains tax to the US — right?

    • Good to be out

      Yes, that is correct, but I was eligible for deductions on improvements that brought my US tax burden down to a much more bearable amount.

  17. GTBO (aka OP), your story closely mirrors mine. You’re a year younger, I originally bought West Side in 1997, became mortgage free, and sold for upwards of $2.5MM in 2011. Placed all the cash with a wealth manager where it’s sitting now, and wondering daily how best to diversify, for growth but mainly for safety. That includes maybe getting back into the RE market (here or elsewhere) at some point. A comment and a question:

    1) I don’t think I could retire despite the windfall, not that I wouldn’t enjoy it. I just don’t believe it’s enough capital to sustain my wife and me another 30+ years, especially as the children are in university and their future self-supportability is not clearly mapped out.

    2) You allude to traveling. Where else in the world have you thought of living? Or investing in foreign RE? Europe, Mexico, Asia, elsewhere?

    • @Rufus why not consider buying a 500k-700k condo with that 2.5m? Something you can rent out now but as a worst case scenario, you could live in once you’re ready to downsize?

      It is people in your situation where buying into Vancouver RE today can make sense.

      In the meantime, rent it out for 2% or so in returns, it means monthly cash flow and get something new so there are no immediate maintenance required. Not sure what your wealth manager have you invested in but it is unlikely to get you anything more than 2% with principle guaranteed. So 1/5 of your net worth in Van RE even in this market is a good diversification play for you IMHO.

      You might even ask your wealth manager, given you meet minimum requirements, to get you allocated into high grade Canadian or US corporate bonds which are as good as hard assets. Yield should be 2%-4%. Make sure you don’t have too much allocated (based on your age) into equities, funds, funds of funds, ETFs, etc as there are hidden fees which make them undesirable for the risk in this environment.

      • Ralph Cramdown

        Unless an investment is a tax shelter or has the possibility of margin or cash calls, its status as a good investment or a bad investment is independent of the investor’s financial situation. The principal isn’t guaranteed in a condo, so why on earth would you compare it to returns where the principal is guaranteed?

        I won’t even address the idea of IG bonds right now. I think your investment advice stinks.

      • Thanks Ralph. I can accept my advice ‘stinks’. In fact, all investments stink in this age of promiscuous money.

        I’m no financial planner. But to do have conviction in my suggestions.

        Regarding IG bonds, if you have access to Bloomberg, please do some analysis. If not : http://business.financialpost.com/2013/01/23/canadian-corporate-bonds-to-provide-solid-returns-this-year/

        Regarding RE, principal is not guaranteed but I was going the angle of a diversification play. My remark was more a concern that his wealth manager has him heavily in equities which would be a poor play for his age.

        So what would you suggest?

      • Ralph Cramdown

        Re. FP Article. “Quick! There’s a crisis in Cyprus! Corporates are up! Publish the YTD numbers so we can move some of this inventory!”

        There’s two kinds of financially independent. The lesser means not running out of money before you die. For that, you likely want a good fraction of bonds, because your portfolio will really suffer if you have to sell at a loss for some of your annual drawdowns. The greater means living only on part of your income and reinvesting the rest so that your portfolio grows with inflation. Depending on lifestyle, a couple with $2.5MM could earn $125k-150k in dividends, reinvest 50 and live on 75, pay practically no income tax and live forever. What kind of a mix is appropriate for that scenario?
        http://investments.yale.edu/index.php/2011-09-22-18-13-43/asset-allocation
        Alas, poor Yale fell off the wagon last year and only earned 4.7%.

        I’d guess that his “wealth manager” has him in a nice conservative portfolio with lots of bonds, because not losing the account is of primary concern, and that means low volatility and similar-to-benchmark returns.

      • Would buying a condo fully paid as a diversification play now and as a primary residence in the future not be considered paying a dividend to yourself? After all, Rufus saves in rent and his home won’t go bankrupt.

        Whatever company is offering 5% now in dividends is not as sound as you think. Placing a large portion of his RE gains into growth investments is no less risky than Van RE.

        Staying in a conservative pattern (and fully paid off RE is that) is a great diversification play for someone like him.

        An over allocation into RE for Rufus would be to buy a newish East side home for 1.2m and rent out the basement to subsidize his old age. Even then, its not a raw deal.

    • Good to be out

      My “windfall” was considerably less than yours, however when other investments are taken into account the difference is less. Actually, I have a really great career and I don’t plan to retire just yet; more like leave bigger and bigger gaps in my consulting jobs so that I have more free time to pursue other interests.

      As for other countries I would consider living in – Mexico, Chile and Colombia are a few of my favorites. Definitely a bias for Latin America as this is where I have spent the most time. I like the smaller cities because most of the goods and services you need are readily available, and they have enough culture to keep things interesting, but without the crime and pollution and congestion of the bigger cities. Important to have a good handle on the local language though in order to get the most out of these places. Europe is of course wonderful but for whatever reason feels too far away for me for a long term commitment; on the other hand travelling there for a month or two is totally okay.

    • “I don’t think I could retire despite the windfall”

      HaHaHa!!! Don’t make me laugh, Rufus. Are you for real? Look man, if you cannot retire on 2.5 million then nobody in this sorrry land will ever quit their jobs. They will be carried out on a gurney and that will be the official last day of work.

      Why don’t you got to Mexico for a holiday and let reality sink in a little.

      • Everyone’s lifestyle is different and it’s not for anybody to judge.

        One thing is for sure, and Rufus might agree, actually having 2.5m in the bank does not feel as secure as imagining one having 2.5m in the bank.

        With money comes worries too – to not lose or squander it.

      • BLM, you’ve got it right, I recognize my good fortune, but it certainly doesn’t make me feel like telling the boss to shove it, and taking off for the tropics. The part about supporting children in university, and possibly beyond, is a worry, as are the lowish returns at present and worldwide economic instability. Plus I’m a very healthy 51 year old and can expect to live quite a while. If I knew I could get a _guaranteed_ 5% after expenses and tax return on the windfall, yeah I’d feel better (after the kids graduate) but I don’t think that’s the case.

      • You can afford to find out though, Rufus. Take a few days AWOL and start enjoying a little freedom. I assure you will be most welcome in the various offices of investment brokers who will happily show you what is available.

        Like anything else….you have got to shop it till you are comfortable.

        Still lauging about no retirement on 2.5 mill. Trying to contain myself though.

    • “I don’t think I could retire despite the windfall, not that I wouldn’t enjoy it. I just don’t believe it’s enough capital to sustain my wife and me another 30+ years” $1.5 Million not enough to retire at 49? I think i cringed when i read that. My dad is 67 he has only $350,000 in savings.

      • No Arshes….he said TWO POINT FIVE million. The guy is starving. Too f***ing funny for words. Must be a troll.

      • Farmer, I am not trolling. One of the strange things about coming into this much cash is that I found myself becoming much more risk-adverse (financially) and oddly fearful of not having enough money. It’s illogical I know. That’s why the original post caught my eye. I wondered how others in a similar position would deal with a sudden windfall, the desire to increase it through clever investment and the dread of potentially losing it.

        With respect to retirement, it really depends on individual circumstance. If you consider the costs of carrying four young adults in post-secondary institutions, some of them (the institutions) quite expensive, I don’t think it’s at all possible to retire at the moment. Moreover, upon retirement, my wife and I would like to enjoy things like travel (not like a sultan but not like a backpacker either), dining out (same criteria), and drinking plenty of well-aged, highly-tannic, old world wines (which are are ridiculously expensive in Vancouver).

        I do not have a company or municipal pension plan. What I have as my net worth will be my retirement income. When you tot up the expenses, there are a lot, and the ROI on a sum even as great as $2.5MM would need to be around _at least_ 6-7% to generate an after-tax, after-inflation income of $100K per annum. (Please, anyone correct me if I’m wrong here). From what I can tell, for the time being it may be difficult to consistently generate that level of return in a safe manner.

        So yes, I will not starve or even live badly. And I don’t want to… ever! I know little of economics or finance, and if I’m trolling, it’s for advice from the diverse readership of this blog who on the surface at least, appear to have a much deeper understanding of real estate and investment than I do. I was a lucky fool who unwittingly won a lottery thanks to the Vancouver RE bubble. And like any fool, in future I could lose the cash as easily as others may lose on RE.

        Arshes76, thanks for your previous investment strategey. Regarding your Dad, I reckon he is supporting has a large amount of equity in his home and a defined-benefit pension? (Remember, I don’t own a home anymore). If not, then the painful truth is that a $350K net worth at that age is not a lot for a retirement fund. All the best.

      • Rufus, try a private client money manager firm lik Connor Clark & Lunn, Nicola Wealth, PH&N, etc, they might be better than the bank wealth management division. However in general, people who manages money care less about how you are doing as long as your portfolio is not in the red too much or too poorly against peers and benchmarks (though which benchmark as that can be adjusted to show benchmark beating performance!).

    • For what it’s worth, a couple I know (with university age kids) cashed out of their westside home using the proceeds to buy a much nicer home in Phoenix (at a considerable fraction of the cost of a Vancouver home) and a large well managed motel in Arizona (average 8% return over the last 5 years). Their US investor class visa was easily obtained based on their “substantial investment” and continued employment of locals. They simply could not find a suitable cash flow positive investment in the lower mainland of BC over the past 5 years and at one point invested in a small motel turn-around project in northern Alberta after the 2009 RE crash. If you truly want to sell high and buy low, it’s probably necessary to leave Vancouver based on my experience.

  18. BLM, What tempts me about your suggestion of buying a rental condo unit is the diversification that it would afford. At the moment, I am renting and my only RE is a family cabin in the Gulf Islands (hardly worth calling an investment). However, what stops me from buying a condo is the same belief as Ralph, that Vancouver RE is nowhere close to its future low. Presently, the capital realized from the house sale is 2/3 in “growth” which has done well since 2011 (about 5-6% ROI) and 1/3 in high yield bonds etc… which have done not as well (~2.5% ROI). Those returns are after the company takes its 2%. I was curious about buying rental apartments in other areas where the rent/price ratio makes more sense. Just don’t know what those areas are… Mexico? Europe? I have no idea.

    • alt_view … i) good move bought a lot of time to study next move … ii) most people not good at evaluating risk

    • Might be hard to manage the RE elsewhere. Some other areas in Canada might be better – well, most areas in Canada are better than Vancouver now if considering buying a RE for investment as Vancouver, and of course not the newer condo with its typically very high cost, high maintenance fee and a very poor construction quality that would most probably cause it deprecate faster than usually (and a special assessment will wipe out the elusive % of profit and send it downhill plus it might decline in a value, when the property is under the renovation it is a very hard sell, you will take a heavy loss if you need to do it fast).

  19. Rufus, ‘growth’ just means equities (stocks). You’ve done it again with your impeccable timing. There’s been a ‘great rotation’ (google it) back from bonds into equities over the last year. Hence the Dow’s record high.

    The worry is you’re too exposed to equities for your age from a risk perspective.

    Whether RE in Van goes down further or not is anybody’s guess (though it is trending down but then again do you think you’ll be lucky with your timing to find the bottom for a 3rd time). Two things: pretty safe to assume RE will surpass current prices within your lifetime, and if it does, move back in for a few years before you sell it to pocket the gains without a capital gains tax.

    As to where, that’s something only you can decide but I would stick to Canada to shield from currency and political risk.

    • BLM: Everyone’s being polite, pretty much, but your ignorance and/or agenda are showing as you lecture people who are better informed and more sophisticated than you are. Whatever your background, you talk like a realtor, inciting fear and loathing about any investment besides RE, assuming that high prices are an inevitable fact of life, cherry-picking your facts about what affects or might affect RE prices. We’ve seen all these talking points before, and smarter people than you have demolished them repeatedly.

      • Canis: I assure you I have no other agenda than to offer my alternative views on this blog. We could all agree and pat our backs and move along as herds but what would be the point of that.

        If I were a realtor or a big hitting investor, would I really spend my time and effort on this blog trying to convince bears to buy?!

        Make a point and let’s have an intellectual discussion if you like, but don’t have a go at me for disagreeing with your views. Challenge mine with your counter argument and facts.

        My argument is that RE in Vancouver continues to be a viable investment/purchase for some people and that we can’t simply say prices are out of whack and say in one broad brush that no one should touch it.

    • “pretty safe to assume RE will surpass current prices within your lifetime” – how can you be so sure and based on what? It is a really low liquidity, high risk, high maintenance and carrying cost investment for now in Vancouver – if it surpasses the current prices by 5% in 10 years after it drops by 30% – would that make it any better than any GIC? Especially condos with the current overbuilding and oversupply.

      • Olga62: If it is a place where the buyer can rent out now but plans to live in when they downsize, then the risk of volatility and liquidity will be removed.

        All I’m saying is, for someone with 2.5m in the bank, having 500k-700k in a property he/she could live in, in the future, is a good diversification play, even in this market. Be it a condo in False Creek or a SFH in Coquitlam. We can agree to disagree.

  20. If you have a lot of cash sitting around , don’t know what to do with it and don’t have the desire/ability to work full time on it, then turn it over to a good financial advisor. Do not invest it on the basis of what some guy on the Internet says.

    • Yes, and make sure it is a reputable fee based financial advisor who is not getting a cut from his stock broker or realtor friend.

      Stay clear of retail or private banks.

  21. That’s the advice I took, and ironically, got that advice off the internet!

    • If it were me i would split the funds accordingly. Take $500,000 and invest that for until i’m 70, thats twenty years lets say at 5% you would have more that double that at 70. Then invest another $500,000 for 10 years for when your 60, at 5% you would have a little under $1,000,000 and that leaves $500,000 for the next 10 years or an extra $50,000 a year.

      • Arshes76 – a sensible plan but just where would one find 5% these days? It’s not easy, I assure you. Of your plan, the 70-year $500k stands the greatest of averaging 5% over time.

      • You obviously do not read Garth Turner BLM cuz for him, 5% return per year is absolutely the minimum while 7%/yr with a 60% equity + preferred + REIT and 40% debt is easily doable with little risk.

      • I don’t doubt 5% can be done but it is far from certain and will carry its own risks. Preferreds are hard to get at the right price. Bonds are in as big a bubble as Van RE. Equities have risen to record highs in the US. REITs are just a investment on the cashflow of RE but not the asset itself.

        Buying a $1m east Van home full out, renting out the basement, and not paying rent seems to me a much safer way to get a 5% return.

        Buddy then still has another $1.5m in the bank to diversify with and because his home is paid for, and he still has a job, he can invest more aggressively in growth even at age 50.

        If this is not sensible, then how can being all in equities, preferreds, REITs and bonds be when they have just as great a chance of falling in a 2008 market?

    • Or try Wealth Management of any bank, you need a minimum of half a million. But they do retirement planning, tax planning, etc….. They charge 1% from what i’ve read but its an encompassing service, even has estate planning etc..

      • Wealth Management/Private Bank advisers are just as slick as realtors. They’ll charge 1% on top of getting a cut from the funds, life insurance, etc…they sell you. All of them have bonuses quotas to meet in selling their clients – just ask any friend you have in the industry.

        Many of the top advisers (in Canada) were selling their high net worth clients the toxic mortgage debts from the US when they were rated AAA. Some of them repackaged the debt into something that was sold as non-real estate related by mixing other bonds into the fund. (Like Lehman Brother corporate bonds which turned out to be as tied to real estate as the NINJA mortgages themselves).

        That’s the concern when you’ve got money in the bank. How not to get fleeced. I’m obviously pointing out the worse case scenarios, just as the bears here are pointing to a worse case scenario for Van RE.

        I don’t advocate Rufus going it alone given his limited knowledge of the financial landscape landscape out there. His financial welfare will be dependent more on his knowledge than his advisers, in the end.

  22. I have a good friend who sells chicken sh*t. He processes it into high nitrogen fertilizer. When I saw that a few years back i honestly knew that a guy could make money on anything if he had enough of it.

    Who needs stock markets when you can sell chicken sh*t for profit.

  23. “Buying a $1m east Van home full out, renting out the basement, and not paying rent seems to me a much safer way to get a 5% return.”

    Vancouver Price to Rent is the worst on the planet Earth, cap rates are so low they are almost negative.

    Several weeks ago when BLM offered to never post on this blog again — you should have taken him up on it. If you’ve listened to a word he’s said then you deserve to lose your $2.5M.

  24. Future~Developer

    This is sheer insanity & bad investment advice!

    Take your money @ $2.5 million and diverify ~ invest in all the major canadian banks, for an interest rate of 4% = $100k/yr ! The banks grow their dividends annually by about 5% + capital appreciation, great investment to hold the world’s strongest banks over 30-50 years !

    Plus Vancouver is highly overvalued, rest of Canada 10~20%, which the banks can easily manage plus they have great exposure to the US turnaround and growth markets!

    Safest investment today, bar-none.

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