Hello There,
[EDIT: edited calculation based on new knowledge of rental income tax implications]
I came across this forum and started reading some of the advice that's been given to the readers here, and thought I would share my situation for some advice.
Life Situation: 26 years old, started work 3 years Consulting Engineering, single, no dependents, living in the Greater Toronto Area (now you know why there's a hefty mortgage, maybe I didn't make the best of decisions when buying the house...)
Monthly Annually Remarks
Gross Salary: 5,833 70,000 all values in CAD
Deductions:
FED Tax 892 10,704
DC Pension 392 4,704 7% employee contribution (6% employer match accounted for separately)
RRSP 258 3,096 With the DC Pension from company, contributions are maxed out. But there is more room from
starting contributions 2 years late.
Rent Income 2,000 24,000 Renting 3 bedrooms to college students at home
Expenses
House Ins. 81 972 Discounted. Same company with car ins. + parent's house +car
Gas 86 1,032
Hydro/Water 130 1,560
Internet 80 9,60 Necessary to rent to young students glued to unlimited internet
Property Tax 323 3,876
Maintenance 250 3,000 Estimated. It's a 3 bedroom townhouse in Oakville
Tax on Rent 300 3,600 Crude estimation based on marginal tax rate. deducted mortgage and other expenses to claim 45% of expenses on income.
Adjusted
Income 5,041 60,492
Current
Expenses
Cellphone 62 744
Household Prod. 25 300
Furniture 50 600
Groceries 150 1800
Restaurants 100 1200
Car Ins. 90 1080
Gas 100 1200
Car Maint. 25 300
Shopping 100 1200
Entertainment 50 600
Gifts/Hosting 20 240
Total Non-Housing
Expenses 772 9,264
Mortgage 3,100 37,200 750k mortgage @ 2.69% 30 yrs 1,350 principle per month (EDIT: corrected a mistake where I put 700k instead of 750k)
Asset:
House: Bought for 775k, with 750k mortgage with access to credit, and in my rent vs. buy calc, selling in 5 years buying & renting is exactly the same, assuming property appreciation at 2% same as inflation, and returns of 7% annually in investments. In reality since I'm not good with investing all my money, so I bought.
10 year old car gifted from mom. Worth 3,000?
Investments
DC Pension 25,000 +392/mo.
RRSP 1,500 +258/mo.
TFSA 10,000 +290/mo.
Emer. Saving 10,000
Savings 30,000 +1,000/mo. (holding cash to figure out where to put it and how much emergency savings I need.)
Total Net Worth: How do I calculate this...? It's around $100,000?
So my question really is can I retire early? What can I do to retire earlier? I cannot sell the house within 5 years. (market is not the best right now, selling costs are too high, and I enjoy living here, its 15min drive from work)
Currently I am saving 56% of my gross 70k income (accounting to equity gain on the house). With my housing rent vs. buy calculations, accounting for equity gain, every month I am throwing $700 out for living in this house, vs. renting somewhere for $1000 with roommates. I bought the house because rental income or renting will only increase, while mortgage payment will decrease. It's hard to predict housing/stock markets, and worst case scenario if I have to move I will rent the unit out to 4 students, which allows me to breakeven on the house (accounting for equity).
Any advice would be greatly appreciated. If you want to see my rent vs. buy spreadsheet I can share it....maybe I made some errors? It seemed to make a lot of sense to buy at the time. In Oakville I believe houses will at least hold its value. 2 bedroom condos are reaching 400k in the vicinity.
Thank you!