Spot The Speculators #99 – ‘Canada Don’t Let Your Retirees Grow Up To Be Real Estate Cowboys’ – Alberta Couple Late 50’s; Net-worth $196K; RE Holdings $1,850K

“Alberta couple, Edward, 58, and Sue, 56, earn gross income of $247,200 per year from working in two great jobs — his in transportation management, hers in health care. Yet they are almost broke.
The problem is they are shelling out $47,514 per year just in interest charges on liabilities that amount to 6.7 times their annual pre-tax income. Their assets add up to $1.85-million, leaving them with a net worth of only $150,000 as the end of their careers comes into view.
The problem will get worse if not fixed, because they are not making a dent in the principal they owe. When interest rates rise, their debts will become ever more costly to carry. Unless they act, they will not be able to retire as planned. They may not even be able to avoid eventual insolvency. “Should we be selling off investments, some at a loss?” Edward asks. “We are working hard to keep our heads above water, but we feel that it is a losing battle. Our goal is to quit when I am 64. Question is: Can we do it with our heads above water?”
The numbers don’t look good: Their debt is about nine times their equity and their investment income is negative.”
– from ‘High-income couple has to deal with some real estate headaches’, Andrew Allentuck, Financial Post, 11 Feb 2013 [hat-tip kansai]

Breakdown of their assets and debt:

Assets (market value where applicable):
House: $950K
BC ‘income-generating’ property #1: $540K
BC ‘income-generating’ property #2: $240K
Arizona Condo: $120K
Total assets: $1.85M

Debt
House mortgage: $758K
BC property #1 mortgage: $446K
BC property #2 mortgage: $329K
Business Loan: $75K
CC Debt: $32.7K
Car loan: $13.2K
Total debt: $1.654M

Net-worth: $196K
RE holdings: $1,850K
Ratio of net-worth to RE: 1:9.4
—

By sensible estimates, one should hold no more than (90 minus your age)% of your net-worth in RE.
By that measure, this couple should have 33% or less of their net-worth in properties; the actual number for them is 944% (yes, not a typo – nine hundred and forty four percent).
If RE blinks, these guys are underwater. In fact, given the current market, they very likely are already underwater in that they’d probably have to drop prices by at least 10% to liquidate their holdings.
If prices drop by 30% or 40% or 50%, or even more, their retirement plans will be completely destroyed.
This is a more extreme example, but the fact remains that a very substantial percentage of Canadian ‘boomers’ are overdependent on the health of the RE market for their future financial health. And, like the couple in this example, they will likely be advised, or forced to the conclusion, that they have to lighten up their RE holdings.
– vreaa

43 years old; Owns 6 Rental houses; Goal is to buy 4 more and retire by 50.

“A hard-working entrepreneur who runs a restaurant and retail outlet, Jim hopes to retire while he is still relatively young and live off the income from his rental properties.
Jim and his partner Bethany live with their toddler in her home in small-town Alberta. He is 43, she is 38. Jim also has a 12-year-old child from a previous marriage.
Jim’s short-term goals include buying four more houses – the ones he has are in Alberta and British Columbia – paying off his mortgage debt and perhaps forming a holding company if it makes sense. Longer term, he wants to retire comfortably at age 50 and leave something for his children.
Jim is doing well, bringing in $10,000 a month before tax from his businesses. He estimates his share – he has partners – is worth $750,000. Bethany, who keeps her personal finances separate but contributes to joint food and housing costs, earns $75,000 a year before tax.
On paper, Jim is looking good. He has $3-million worth of investment real estate. Still, he is mindful of the other side of the balance sheet – the $1-million-plus of mortgage debt, which he hopes to have paid off by the time he is 55 or 60.”
—
“So can Jim retire at age 50?
Jim figures he will have his mortgage debt paid off by the time he is 55 or 60. His financial picture at age 50 is less clear. As well, Jim doesn’t have a firm handle on how much money he will need when he retires. In his application, he lists “spending money” of $2,500 a month or $30,000 a year after tax.”
—
“Jim is taking home $84,000 a year from his businesses now plus another $12,000 in net rental income, for a total of $96,000. If he sells his share of the businesses for $750,000 and invests the proceeds at 4 per cent a year, he will be making $30,000 a year before tax. When calculating how much Jim might need in retirement, the adviser uses a rule of thumb of 70 per cent of preretirement earnings, which in Jim’s case would be $67,200 before tax. Thus his revenue properties would have to generate at least $37,200 a year after operating expenses to make up the difference, substantially more than the $12,000 a year they are throwing off now.”
—
“Monthly net income: $8,000
Assets: Bank accounts $25,000; stocks $50,000; TFSA $25,000; RRSP $25,000; RESP $10,000; six rental houses $3-million. Total: $3,135,000
Monthly disbursements: Mortgage $900 (his share of $1,800); other housing costs $790; car lease $500; other vehicle costs $390; groceries $250 (his share of $500); child care $900; clothing $300; gifts, charitable, other $150; vacations, travel $200; dining out, entertainment $250; clubs, sports $150; grooming $50; doctors, dentists $250; drugstore $100; cellphone, Internet $200; RESP $200; TFSA $400. Total: $5,980
Liabilities: Mortgages $1,062,000; car loan $17,000. Total: $1,079,000”
– image and excerpted text from ‘An entrepreneur’s path to early retirement’, Dianne Maley, Globe and Mail, 14 Dec 2012 [Hat-tip Makaya at VCI]
—-

Jim and Bethany have accumulated a net-worth of over $2 Million ($2.75 Million if he were able to sell his share of his business), by the age of 43, on a household income of less than $200K before tax. This is remarkable. It is highly likely that a large portion (almost all?) of their gains are due to the increase in the paper value of the six rental houses that they own. This would also explain their desire to “buy four more houses” – this sector has treated them well and they expect it to continue to do so.
As others have pointed out in the G&M comment section, simply liquidating all of their assets and investing in conservative instruments would already possibly spin off enough income for them to be able to retire soon.
A disastrous outcome would be the use of their equity to buy even more RE at the very peak of a nation wide speculative mania in housing. Worse still if they are tempted to use leverage by increasing their mortgage debt. This is the way that many with impressive paper gains on RE holdings, at this point in the cycle, will give them back (and in some cases even be wiped out) in the coming market weakness.
As an aside, note the misallocation of resources that comes with the speculative mania: in this case we have a couple considering leaving the workforce in their 40’s.
– vreaa

Calgary – Recent Arrival; Now Carrying Two Homes – “I told him about 1982, the ’90s, and 2009. He blanched and left my office immediately.”

“A colleague dropped by my office the other day to announce that he had recently bought a new home in Calgary with a $400k mortgage. (Better school catchment area) A recent arrival from India, he asked about selling his old place that has a $300k mortgage. He thought he should keep it and rent it for a net monthly loss of $200.
I asked how long it would take him to pay off $700k and he had to think about it for a while, but it worked out to about 30 years or more. He obviously had not considered this and seemed surprised at the result. I launched into a lesson about Calgary’s fortunes being tied to oil prices and told him about 1982, the ’90s, and 2009. He blanched and left my office immediately.”
– armourb at VREAA 22 Jun 2012 8:32am

An Ambivalence Of Riches – “Its HARD to leave once you’ve lived in Van. Had I never left Calgary I could have lived there for the rest of my life and been satisfied.”

“My husband and I moved to Vancouver from Calgary 3 years ago. In terms of employment and housing, were not doing so hot out here. So why do we stay and rent a crappy basement suite?…the reason is you think Calgary is nice and green until you move to Van. That’s when you realize how truly cold Calgary winters are and how not-so-green it really is (just some random pine and poplar trees spread out over fields, really). Its HARD to leave once you’ve lived in Van. Had I never left Calgary I could have lived there for the rest of my life and been satisfied (perhaps, happy) and would have never seen the weather and beauty Van has to offer. Now we have to make the difficult decision to go back to Calgary since living in Van has cost us a lot. We have family and friends back home (Calgary) and they’re all in their late 20′s like us, they’re getting great jobs, have money to travel, and are buying up 300,000 houses (not apartments, not townhouses…actual houses with 3 or more bedrooms and a backyard). My advice to anyone is, if you live in Alberta, stay there, don’t TRY Vancouver, it’s very hard to leave once you’re here just because of how beautiful it is.”
– LisaMK at VREAA 3 Jun 2012 1:07pm

Full and satisfying lives can be had in Vancouver and in Calgary… and in hundreds of other places around the globe.
– vreaa

Calgary After-Dinner RE Chat – “Renting is scoffed at. These bulls apparently do not believe that any significant economic or political events could impact Canadian RE values. Denial is powerful.”

“Was at a swank inner party last night (here in Calgary where I live) with 6 couples including my wife and I. At around 9:00pm when the table had been cleared and the many pre-dinner drinks and about 8 or 9 bottles of utterly intoxicating wine had been consumed, the after dinner whisky, scotch, and cocktials started to flow and the conversation around the table turned to real estate, economics, and politics.
The host couple (close personal friends of ours) and my wife and I were the only RE bears at a table full of RE bulls. Time for a little background, the host was a wealthy doctor who acquired his home on a golf course 11 years ago for about 1/3 of what it might be sold for today. He owes about $200K and will have the mortgage paid in full in 24 more months. If the property dropped back to what he paid for it they would not be materially financially impacted in any way, since they didn’t know that, or plan for, any appreciation due to a boom in RE values. They built the house to live in and pay off in a decade. It is one of a portfolio of many international properties that they own, amongst other things. The correct definition of homeowner could be applied here. We are renters here, even though we own a single piece of property in another continent that is paid for. Over the last 11 years we have saved a mid 6 figure sum in cash by renting, staying out of debt and living within our means.
These bulls apparently do not believe that any significant international economic or political events could impact Canadian RE values. Witness the election of a socialist to the presidency of France for example and the ramifications thereof. The Euro zone will create problems for all of us. As will the US and China.
It is also their entrenched belief that interest rates will never rise in Canada for a very, very, long time. Even though as other nations react and perhaps have to raise rates to attract capital in order to keep their financial ships afloat, poor little ole’ Canada will have no choice but to follow along or be left behind. Of course, we may just raise rates due to the bubble (that does not exist mind you) because we need to stop the madness and eventually one government will do so of their own accord when they come out of the ether.
Renting is scoffed at, merely because it does not support the last generations ingrained mental foundation of wealth creation, that all of your eggs must be in a piece of property or you are in a class lower than everyone else. When I was explaining that a renter can do just as well as, or IMHO better, than someone who had all of their net worth in a single piece of property, the guffaws could be heard round the table except at our end. Yet they could not, nor would they even try, to rebut our position with logic facts and reason, since perhaps they knew we held all the cards. Their arguments were entirely emotional in scope, and easily debunked. Just like any RE agents sales pitch.
At the end of the night I was looking at them and, to me anyways, it seemed that they were all dressed in black pants and shirts while wearing brand new white Nikes…… waiting for the RE comet to take them away (a la ‘Heaven’s Gate’). Denial is a powerful belief system.”
– Carioca Canuck at VREAA 6 May 2012 2:43pm

“There’s a lot of peer pressure to move back home coming from family and friends, who don’t understand why anyone would want to leave the ‘best place on earth’. We feel a subtle undertone that what we’re accomplishing is worth less because we’re not doing it in Vancouver. As ex-Vancouverites born and raised, we can’t help but subconsciously agree.”

“My husband and I are both professionals in our early 30’s (medical and legal) who were born and raised in the suburbs of Vancouver and grew up in comfortable middle-class families. We both moved to Alberta after our undergraduate degrees at SFU, to pursue our respective professions at the University of Alberta (cheaper tuition and better regarded programs than UBC for both of us). After graduation (around 2008), we chose to stay in Alberta for a little longer to save up for a house in Vancouver. We’ve been following the housing market in Vancouver ever since and we read VREAA and Greater Fool every day. Following the market with the dream of someday moving ‘back home’ has become a ritualistic obsession, waiting for the day the market tanks and we can fly back to Vancouver with suitcases of cash. Needless to say, we’re still waiting and watching.

Since we left Vancouver, we have been the ‘outsiders’ in our respective families (both families are located exclusively within the lower mainland), flying home for Christmas and in the summer but missing out on the everyday family gatherings. There’s a lot of peer pressure to move back home coming from family and friends, who don’t understand why anyone would want to leave the ‘best place on earth’. We feel a subtle undertone that what we’re accomplishing is worth less because we’re not doing it in Vancouver. Of course, none of the people judging us have ever lived or worked outside of Vancouver. As ex-Vancouverites born and raised, we’ve had the ‘Vancouver superiority complex’ imbued in us and can’t help but subconsciously agree.

Both of us have held various jobs in Edmonton and have recently relocated to a small town a couple hours out of Edmonton for better career opportunities (i.e. to save up more money to move back home). Funny thing is, we’re actually starting to like it. Growing up, neither of us had thought much of the small-town life, believing small town folk were hicks (Vancouver superiority again). But, friendly people, a 5-minute commute to work, affordable housing, and stable jobs where we can easily make 3-4x what we’d make in Vancouver are awfully tempting. The cost of living here is much lower than Vancouver. There is no PST/HST in Alberta, and gas is about 30c/L cheaper. Housing in our town is fairly priced compared to the median family income. Alberta is also quite a beautiful province full of outdoor recreation opportunities, although it took us a while to appreciate its charms.

Young people in our town have amazing opportunities both to work and start a family. A colleague’s husband bought his first house at 18 (6 years ago), with money he made working in a skilled trades job. (By the way, detached houses under 100k still exist!) Because there is a REAL economy here, based on tangible things like trades, equipment manufacturing, outdoor recreation, etc, there are plentiful jobs available to anybody willing to work. I remember growing up and struggling to find a summer job in high school/university. I wouldn’t say jobs were plentiful growing up in Vancouver.

Sure, we can’t get sushi at 10pm on a Sunday, but going to Edmonton is an easy drive on the weekends to soak up some culture and go shopping. The irony is, in many ways the small town lifestyle is more cultured and wholesome than where we grew up. People take time for real self-actualization: gardening, baking, reading, travel, outdoor recreation, and community involvement. Contrast this with young people in Vancouver who either still live at home into their late 20s, or have moved out into 600k condos while earning 70k a year (if that), and go around driving luxury cars, thinking they’re hot stuff because they “own” a house in Vancouver.

If it weren’t for the family ties we have back home, we would not even be considering moving back. Vancouverites perpetuate the illusion of the ‘best place on earth’ either because they’ve never lived anywhere else and don’t know any better, or to justify a vastly overpriced lifestyle in which a person pays more and gets less than anywhere else in the country. To see the situation as it really is would be heartbreaking for most young people who’ve mortgaged their futures in an attempt to live a similar lifestyle to that they grew up with. Sadly, Vancouver has permanently changed, and it’s not just housing prices. Whether the bubble bursts or not, the social landscape of the city has been irreversibly altered and we’re not sure the ‘new’ Vancouver is a place in which we want our children to grow up.”

– ‘Watching And Waiting’, via e-mail to VREAA, 26 Apr 2012

‘W&W’ generously shares with us her complex, mixed feelings about living in Vancouver (or not).
It is often challenging for young people to make decisions about where to live (family, jobs, lifestyle, ‘social landscape’), and atypically large differences in RE prices add another significant variable. Over the last 5-10 years, the RE variable has become a game-changer for many.
– vreaa

“Garassino has actively discouraged her own kids from waiting around to find out how it unfolds” – “I tell my kids to go out and seek their fortune elsewhere. You can’t do it here. These are kids that could build Vancouver. They’re educated, ambitious and entrepreneurial, and they don’t think that Vancouver represents opportunity for them.”

“It’s not that Baroldi fell flat on her face when she moved to Vancouver. She found work, made friends and started to build a new life for herself. But she also didn’t feel like she was making enough meaningful progress in her life — instead, like so many other people her age, she was just effectively treading water. Vancouver, she says, is probably a wonderful place to be 20. But, as she discovered, people’s priorities change at 30, which is part of the reason she moved back to Edmonton late last year. “As soon as people hit 30, they run into a wall,” Baroldi says. “They have different life goals. While they can be achieved in Vancouver, they can’t be achieved as easily.”
—
“For those who do need to make a living, Vancouver is just about the furthest thing from livable. That’s a direct result of the city’s turbo-charged real-estate market. It wasn’t that long ago that middle-class families could afford to buy middle-class homes in Vancouver-proper without selling their children into slavery, but those days are long gone. According to Royal LePage, the price of an average detached home reached $1,017,500 in the fourth quarter of 2011. Meanwhile, Vancouver real estate team Faith Wilson Group says the price tag on a place located on the west side of the city hit a staggering $1,656,986. The average price of a condominium, on the other hand, was $536,500 — more than $200,000 higher than the average price of a house in Edmonton.”
—
“Eventually, something’s going to have to give — that is, if it isn’t giving already. That’s the message that Sandy Garossino, a Vancouver-born (and Alberta-raised) lawyer and business owner, spent the recent Vancouver civic election trying to spread as an independent candidate. She contends that while there has been plenty of talk about the negative impact of the recently implemented and more recently rejected harmonized sales tax, it’s the city’s real-estate market that’s doing the real damage to local business. “I have two concerns: That we’re in a housing bubble, or that we’re not.”
Either way, she’s actively discouraged her own kids from waiting around to find out how it unfolds. “I tell my kids to go out and seek their fortune elsewhere,” she says. “You can’t do it here.”
In fact, Garossino thinks that this exodus of young talent is the biggest cost associated with Vancouver’s real-estate mania. “These are kids that could build Vancouver. They’re educated, ambitious and entrepreneurial, and they don’t think that Vancouver represents opportunity for them.”
—
The Vancouver Foundation, an organization which works with all communities in the city, asked a wide range of people what they thought Vancouver’s biggest problems were, and it expected to find the usual suspects — homelessness, urban poverty and a lack of affordable housing — at the top of the list. Instead, it heard something quite different from Vancouverites: They felt isolated and alienated, and that they didn’t like it.
—
– excerpts and image from ‘Paradise Found’, by Max Fawcett, avenueedmonton.com, 3 Apr 2012. The article deals with Edmontonian ex-pats returning from Vancouver, and the deleterious effects of RE prices on Vancouver communities. [Perhaps rather ‘Paradise Regained’? -ed.]
—

The most profound negative effect of the speculative mania in Vancouver RE has been the severe misallocation of human capital.
– vreaa

Professors Cross Threshold – “After this fiasco we are completely done. I phoned U.Alberta today and told them that we will take the jobs if they offer them to us. In our view this city is being rapidly ruined.”

‘mjw’ writes, in two e-mails to VREAA, 5 & 6 Oct 2011 –
..“What happened to us this past weekend offers a glimpse at the ridiculous game being played out on the westside.
..My wife and I are both profs at UBC, mid 40’s and have been trying to “upgrade” from a duplex on the westside to a SFH in Kits in order to get more space for our family, while retaining a good school district and a short commute. I wrote a post on VREAA a few months ago [12 May 2011] indicating that we are applying for academic jobs elsewhere in Canada. However, finding comparable work for two senior academics is a challenging enterprise, and takes much time to sort out. To make a senior hire in academics is often a long process, and the department needs to know that the candidate is serious on accepting if an offer can be generated. Fortunately, my wife and I are both at the top of our professions and we have been “head-hunted” a few times since 2000, but on those occasions had decided to stay in Vancouver. Fortunately, we both have interviews at U.Alberta in November, and we are pretty confident that this is where we will end up.
….In the interim, we continue to look off and on in Kits with the idea that if we are able to find something decent around the 1.5M price range we might just suck it up and try to buy it…
….In this light, this past weekend we went to the open house at 2655 Waterloo street [MLS number V912486] advertised at the magic number 1.488M…
….If you look tonight [5 Oct 2011] you will still see this as the advertised price. It was an okay house, not great by any means, no dining room, a 10 times 11 master, nanny suite rather than a basement suite, low ceilings etc…. The presenting realtor was so obnoxious that I was worried that my wife might launch at him during the open. The house was significantly less desirable than 1.6M homes that have sold in our neighborhood since last spring that we have seen in (and were unsuccessful in getting during a bidding war).
….Anyways, we made an offer in the low 1.5M’s, and were one of 3 offers presented this past Monday at 1pm. I have a sense from what our realtor told us that we were the highest bidder.
….Got a call from our realtor on Monday evening saying that they were rejecting all offers, as they really wanted a price of 1.698M (which is simply 210,000 more than the price of 1.488M advertised on the weekend of October 2nd). You can see the new listing and the new price on the realtor Julia Lau’s website (scroll down to 2655 Waterloo street listing).
….On Monday evening the listing realtor contacts our realtor and asks “are we interested in purchasing at 1.698M?”…. My first thought was that someone clearly has transposed some digits?… surely this is a joke?… Anyways, it is no joke, this is precisely the game being played here…. and perhaps is being played out in many other “transactions” on the west side…. A complete waste of everyone’s time (writing offers, visiting open houses etc…)…
….After this fiasco this past week we are completely done. I phoned U.Alberta today and told them that we will take the jobs if they offer them to us.
I don’t know if this is normal procedure; advertising one week at 1.488M, and then the next week at 1.698M… but this to me is a clear sign that there is rampant speculation and that buying bricks and mortar has turned into an auction…. In our view this city is being rapidly ruined…..
—
….“Renting a SFH on the westside is very unstable; places are being flipped like burgers; there would be little stability with regards to schools for the kid. I have watched my graduate student have to move 4 times in the past two years owing to the fact that his basement rental (shared with another student) is in a house that is being flipped. The overwhelming feeling is that at this stage of our lives it should not be so difficult. We will have an easy go in any other place in Canada…..
….I think that some sort of activism is needed to highlight and make people aware of the game that is being played out. If this type of behavior receives more “press”, hopefully individuals will choose to boycott the system until some sanity returns. I do hope that some maverick decides to run for city councilor who can really communicate the difficulty faced by so many families. I think it would resonate with so many people…..”
—

A remarkable story.
The loss to Vancouver of two bright professionals, and their family.
One example of the misallocation of human capital caused by the speculative mania in housing. It is crippling our city.
Only the most blasé RE bull will be able to read stories like the one above without feeling concern for the health of our community.
– vreaa

“I just can not wait to move to Alberta in the new year. This is a major loss to BC. My education was funded by BC taxpayers.”

“I am completing my bachelors degree in December. Vancouver does not have entry level graduate trainee programs. This is mainly due to the lack of head offices. All jobs in Vancouver demand experience and will pay peanuts.
Now, Ontario and Alberta have hundreds of graduate entry positions with salaries ranging from $40k-50k. Even if Vancouver were to offer such positions – $40k in Vancouver is below the poverty line. Being a mature student with a family, my income should be able to offer my family a middle class existence. For me apartment/condo living does not cut it. I want my kids playing in the backyard. In other Canadian metropolitan cities one can buy a detached family home for $250k. It might not be all that but as a starter home for a young family that would be great.
I just can not wait to move to Alberta in the new year. This is a major loss to BC since my education was funded by BC taxpayers. As a full time student I had to put my child into daycare and the province subsidized the cost. I even received rent subsidies. I would have loved to serve the Province that enabled me to attain an education but just can not afford to due to the exorbitant cost of living and lack of meaningful career opportunities.
When you are as busy as I am you hardly have time for the skiing and kayaking. During winter times Vancouverites also get to shovel snow off their driveways. Vancouver winters are relatively mild compared to other parts of Canada but Vancouver weather is no California weather.”
– IamOuttaHere at VREAA 26 September 2011 at 11:16 pm

Professional couple; Lived in Vancouver for 4 years; Moved to Calgary to better jobs; “It was ridiculous in Vancouver; we didn’t want to pay the bubble price to buy a tiny shaky box there.”

DWANG at VREAA 17 May 2011 11:25am – “My family lived in Vancouver for around 4 years. We are not the millionaires from China but professional couple. I had a decent job at bank as IT engineer in Vancouver since we arrived 3-4 years ago, but my wife she couldn’t find any chance to work back in her field. She was a physician and has medical doctor’s degree. My family moved from Vancouver to Calgary just within 1 month. I got a higher payed job at Calgary before we moved in. And within 1 week, my wife got a offer at Alberta Children’s hospital as a medical researcher. Now she is happy and waiting for the new job started at the end of this month. Now we could relief a little bit and start enjoying the life. We are planning to shopping around within 1-2 years in Calgary to find a house for my family. Before it was ridiculous in Vancouver and we don’t want to pay the bubble price to buy a tiny shaky box there.”

“I won’t say never, but it will be a long time before I would be able to afford a home on the street I grew up on.”

Eli at VREAA 15 Apr 2011 5:45am – “Vancouver, my beautiful home… I won’t say never, but it will be a long time before I would be able to afford a home on the street I grew up on. I feel ripped off! Who made life unlivable for native Vancouverites? Was it speculation and investors? I remember a time when it was totally safe to cruise the streets, even at night as a kid. Now as a full grown man I wouldn’t take the chance… Looks like since the 3 years I’ve left things have gotten even worse. Now I live in Alberta and make 3-4 times what I made back home, and no, not on the rigs. And I can buy a nice HOUSE for 250k here, with a yard!”

[In their posted comment, Eli gave their url link as that of an Albertan ‘full service painting and restorations company’, which means their current economic health is likely closely tied to the RE bubble. – vreaa]

Spot The Speculator #14 – “Third generation Alberta real estate investor” recommends a fail-safe retirement plan

This young RE bull not only suggests a ‘money-for-nothing’ ‘retirement plan’ that is downright dangerous at this stage of the market cycle, he also implies that those who foresee a RE crash are somehow mean spirited and somehow against “offering something that people can do to help themselves”. In reality, most of the bears I know have become more and more vocal about the preposterously overvalued RE market for the very reason that they DO care… They care about the effect of the bubble on themselves, their families, their friends, and their society. From the bearish perspective, “something that people can do to help themselves” is to sell their overvalued speculative RE now and save themselves a lot of suffering later. -vreaa

The image above and the article below from 30 year old “third generation Alberta real estate investor” W. Chris Davies at his blog chrisdavies.ca 31 Jul 2010 –
“My $200,000 Retirement Plan.
So, this is actually really simple.

1. Buy a $200,000 house today.
2. Rent it out, making sure you’ve picked a house where the rent covers the expenses with a bit leftover.
3. Wait 20-30 years. That’ll make me 50-60.
4. You’ll have (at least) a $200,000 asset free and clear that you can sell, remortgage or light on fire.
5. Repeat Step 1 as able while you’re young.

Make sense? What do you have that’s better? What’s holding you back?”

In response to comments below his post, Chris added:
“It’s not rocket science and I’m always reminded of the (now) cliche ‘don’t wait to invest in real estate. Invest in real estate and wait’”
[in response to a comment that “Alberta will crash”] “It’s easy to say things will explode. How about offering something that people can do to help themselves?”

Elsewhere on his blog, Chris describes himself thus:
“I have worked for a property management company in a variety of positions, including resident manager and property management assistant. I have been involved with real estate since I was born. I am a third generation Alberta real estate investor.  I am a member of the Real Estate Investment Network. My parents are as well. I do not have any financial ties to the property management company I formerly worked for, or to any corporate body involved in the real estate industry, except my own. I’ll do my best to disclose conflicts of interest where they exist.”

[This link via e-mail from a reader who wishes to remain anonymous. Hat-tip to them. -ed.]

RE Advertising Saturation – “Where are the ads for all of the other businesses in the area? The only ones that can afford most of the advertising are in the real-estate business.”

RE ad saturation is indicative over overheated markets and bubble tops. This anecdote from Alberta could just as easily describe Vancouver. -vreaa

Here’s popeye the sailor man at vancouvercondo.info 27 Feb 2010 1:33 pm –

“Yesterday I went to the local Safeway in Spruce Grove [Alberta], and as I enter the lobby there are 6 Magazines in the free bins about real estate or home-renos. I grab my cart, and at the front of the cart an Ad for a local realtor, I look at other people’s carts and they all have the same ad from one realtor. I get to the check-out and the lady in front of me passes me a divider and on it is advertising for two new high end housing developments, I get past that and get my slip and in the back I see ads and again 2 of the three ads are for a realtor. On the way home now fully aware of advertising I pass 8 for sale signs and 4 bus benches with real-estate advertising 2 mortgage broker signs (2%VRM) and 5 billboards for new developments. Stopped and got my mail and there was 3 postcards for just listed homes in the area, hanging on my door is the Grove examiner which has 20% news, 40% real-estate, 20% car ads, and 20% other ads. Is it any wonder we are real-estate junkies. Where are the ads for all of the other businesses in the area? The only ones that can afford most of the advertising are in the real-estate business.”