Author Topic: House Purchase - Calgary  (Read 3849 times)

CanFI40

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House Purchase - Calgary
« on: April 01, 2014, 12:41:57 PM »
My husband and I are seriously contemplating selling our current home (estimated value $600K). We live in the suburbs with inadequate public transportation. However, we do live within walking distance of my family. We currently spend $300/month for parking in addition to car-commute costs. We would like to move to a community that is on the other side of my family (i.e. still in walking/biking distance) but is much closer to the core and within walking distance of the C-train line. This would also allow us to bike in the ice-free months. The problem we're facing is the fact that a comparable home would definitely be outside of our budget, we're willing to downsize but we can't take on a do-it-yourself reno because of extreme business related time commitments plus a one year old and three year old child. Houses are selling for over-asking price in one day. The question, should we spend an additional $100-150K for a home that is much closer to our office?

Our current commute is as follows:

Me - (very early morning) drive to a friends house in the community we're looking at house in, park, walk to C-train line, C-train to core, walk to office;
DH - (normal morning) drive kids to dayhome in the above community, drive to office;
Me - (early evening) drive from office to pick kids up from dayhome, drive home;
DH - (usually very late night i.e. 9 or 10ish) walk to C-train from office, C-train, walk to friends house where I parked car in the morning, drive home


anisotropy

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Re: House Purchase - Calgary
« Reply #1 on: April 01, 2014, 02:58:39 PM »
ya calgary parking is expensive, didn't someone say it's more expensive then mega cities?

will you still need to drive your kids to dayhome if you move? because then it boils down to 100k up front vs 300/month for parking...

5inatrailer

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Re: House Purchase - Calgary
« Reply #2 on: April 01, 2014, 03:21:47 PM »
See : thegreaterfool  (google) Garth Turner comments on all things real estate in Canada (basically we're all nuts)  He has a very informative blog that also includes investing advice, mortgage selection etc.

He saved me TONS of dough.  He also works on a fee basis for individual investment advice.  I'm guessing he would advise you to sell the house, and rent where you want to live.  RE is very inflated now.  Would you feel comfortable investing 700k in ONE stock? I wouldn't.

Good luck either way.  It's great to have options.

jd

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Re: House Purchase - Calgary
« Reply #3 on: April 02, 2014, 09:58:23 PM »
You may also want to consider some other factors in deciding whether to move:
1.  Which location would be better for schools when your kids are a few years older?  Would your nearby family look after the kids before/after school?
2.  If you moved, would you be able to get rid of one of your cars?
3.  Is financial independence one of your goals?  If so, how close are you to FI now and how would buying a new house impact the timeline?  Where would you want to live after reaching FI?
4.  How much would it cost to rent a house in the area you like?

CanFI40

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Re: House Purchase - Calgary
« Reply #4 on: April 30, 2014, 02:00:25 PM »
Thank-you for your replies. We sold our house for above asking (610K, 380K mortgage remaining at 2.5%)  in a weekend (although we had an offer on the first day). We're moving into my parents place for a month or two until we find a place within our budget. We're going to try and get a smaller place (1100 SF + basement that we can finish or is finished) so that we don't pay any/much more than what we got on for our current house which has more space than we really need (2000 SF + basement).

We initially considered renting but the costs are astronomical ($2500-3500/month) for a house/townhouse in the areas we're considering if you can even find a place, the market is that tight. I've read Garth Turner's blog but I'm not sure how that would work with the rents here in Calgary.

The locations we're looking in have great schools within walking distance. This is a priority for us because the area we live in now has no public schools, private schools within walking distance cost minimum $10K/yr for each kid. When we bought (i.e. 6 years ago) there was supposed to be schools built in the near future but that didn't happen and likely never will. We don't get any regular childcare help from the family. However, my schedule is fairly flexible so I can go into work earlier and get off for when the kids get home from school.

We would be able to walk/bike to our dayhome so there wouldn't be a need for an additional car or parking downtown. Most of our daily commute and activities throughout the week would be by foot/bike+bike trailer/LRT. So yes the ultimate goal would be to ditch one of the cars.

Our NW is around the million mark, however, most of that is tied up in our business with other partners and won't be realized until we sell. The time frame for that is roughly 5 years out. If things go moderately according to plan (above) we'll be FI at that point. If the business goes bust, its currently thriving but you never know, we will likely be FI in 10 years. Our current savings rate is 56% of net income, without dividends from our company and other increases in income this is going to go up to 64% within 2 years when my oldest doesn't need FT childcare and 71% within another 2 years when my youngest doesn't need FT childcare. Our childcare costs are insane (i.e. 26K for the year). The house purchase doesn't really impact things too much. I don't really count on it as an investment (I'm not including it in my NW and FI calculations) but as a place for my family to live, the costs are too high in this town.








5inatrailer

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Re: House Purchase - Calgary
« Reply #5 on: June 01, 2014, 08:34:25 AM »
Right on- congratulations on the sell.  It's always best to have options and your lifestyle choices and Ca$H gives you lots of options.

Garth also has a few blog entries on how to select a realtor and how best to buy a new house.

It sounds like you guys have your crap together. No advice needed here on the forums. Keep us posted tho eh.

Mr Mark

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Re: House Purchase - Calgary
« Reply #6 on: June 01, 2014, 09:11:33 AM »
Don't dismiss the rental option - crunch those numbers! 

If a house is selling for 700k, and renting for 3500k... the landlord has to maintain it, pay property taxes, pay interest on mortgage. This would not come close to being an attractive rental opportunity from the owner/landlord's side.

Often if buying is super expensive, ie the landlording people wouldn' t touch it because it doesn't cashflow, renting works out financially better given your ability to move exactly where you can minimise other expences. You miss out on appreciation,  which in calgary has been extremely good- lately. That's the risk, but betting on appreciation using borrowed money is a dangerous game.

meanwhile you can invest that capital in a way that does cashflow! And not worry about having all your eggs in one highly inflated illiquid asset class...

totoro

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Re: House Purchase - Calgary
« Reply #7 on: June 01, 2014, 10:02:07 AM »
See : thegreaterfool  (google) Garth Turner comments on all things real estate in Canada (basically we're all nuts)  He has a very informative blog that also includes investing advice, mortgage selection etc.

He saved me TONS of dough.  He also works on a fee basis for individual investment advice.  I'm guessing he would advise you to sell the house, and rent where you want to live.  RE is very inflated now.  Would you feel comfortable investing 700k in ONE stock? I wouldn't.

Good luck either way.  It's great to have options.

Not Garth Turner and the Greater Fool again.   I'm not a fan.  If you read Garth Turner you need to do your homework and not rely on his self-promoting, albeit entertaining and prolific, articles.

His blog sets him up as an authority, yet he has been consistently and absolutely wrong in his predictions for many many years.  He has even admitted he was wrong in predicting a crash.

Also, it isn't writing as far as I'm concerned, I would call it a sales pitch for his financial services and his books. He removes dissenting opinions from his comment section, even those by well-respected folks like Ben Rabidoux and makes personal attacks on those who disagree with his opinions.   http://www.theeconomicanalyst.com/content/more-bit-disappointed-garth-turner

That said, real estate does not rise in a straight line and prices will stall or drop generally after a period of higher than expected inflation I believer can expect prices to stall or dip at some point.   I guess Garth will say "told you so" at that point.

I'm curious as to how exactly  Mr. Turner saved you "TONS of dough"?   And how exactly is a leveraged home purchase with a mortgage at all like putting $700,000 into a stock.  You have to live somewhere and the equation is rent v. buy and the amount left at the end of the day not buy v. stock market and then find some magical pocket of unrelated money from which to pay for a place to live.

To the OP, in your market area are suites an option?  If you would be okay with that it can bring your housing costs down a lot and provide a hedge against future rising interest rates or falling property values.

5inatrailer

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Re: House Purchase - Calgary
« Reply #8 on: June 01, 2014, 12:14:12 PM »
Ok totoro...

Garth was preaching how the bond market controls the mortgage market- NOT the national bank setting overnight rates.  He was right.  He said bond dividends were going up, so lock in that mortgage.

So here's what I did:

I redid my mortgage of 90k from 6% (land only mortgage- long story)
LOC 50k at 6 %(loc from supplemental pension fund so I could buy in to 300k worth of dough at 51!)
plus 20k loc at 6% from building my garage

into a mortgage at 3.18 fixed over 5.  Saved me 50% of interest payments which in year 1 was around 6k in after tax dollars.

Also, Garth was preaching how the stock market was undervalued (for sale is his term) so I bought what equities I could in jan 2012 and then it's gone up 11-14%.
He also talks about a balanced portfolio- I copied canadiancouchpotato.com portfolio and I sleep very well at night knowing I'm protected with bonds (that still pay me money) and equities that protect me from inflation.

True, most of his posts are about smashing the realtors cartel- they deserve it.
Also remember he's from toronto and it's totally out of whack out there.

He's making me rethink building our dream home for 500k and retiring in 13 years.  Instead, I'll make do with what we have, and buy a house in hawaii with the extra cash.

Other than MMM, Garth has had the most impact on how I view investing and money.

Who has influenced you?
Brian Campbell from money talks?
The stock idiot on CNN?

Don't turn this into a Garth bashing.  All advice is somewhat biased.

totoro

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Re: House Purchase - Calgary
« Reply #9 on: June 01, 2014, 01:25:19 PM »
Ok totoro...

Garth was preaching how the bond market controls the mortgage market- NOT the national bank setting overnight rates.  He was right.  He said bond dividends were going up, so lock in that mortgage.

So here's what I did:

I redid my mortgage of 90k from 6% (land only mortgage- long story)
LOC 50k at 6 %(loc from supplemental pension fund so I could buy in to 300k worth of dough at 51!)
plus 20k loc at 6% from building my garage

into a mortgage at 3.18 fixed over 5.  Saved me 50% of interest payments which in year 1 was around 6k in after tax dollars.

Also, Garth was preaching how the stock market was undervalued (for sale is his term) so I bought what equities I could in jan 2012 and then it's gone up 11-14%.
He also talks about a balanced portfolio- I copied canadiancouchpotato.com portfolio and I sleep very well at night knowing I'm protected with bonds (that still pay me money) and equities that protect me from inflation.

True, most of his posts are about smashing the realtors cartel- they deserve it.
Also remember he's from toronto and it's totally out of whack out there.

He's making me rethink building our dream home for 500k and retiring in 13 years.  Instead, I'll make do with what we have, and buy a house in hawaii with the extra cash.

Other than MMM, Garth has had the most impact on how I view investing and money.

Who has influenced you?
Brian Campbell from money talks?
The stock idiot on CNN?

Don't turn this into a Garth bashing.  All advice is somewhat biased.

Okay, it sounds like you refinanced to a lower rate based on his advice that rates would rise.  They have dropped.  I'm not sure why you did not refinance earlier given the rates you had, but if he clued you into the fact that you could do that great. 

The second bit, it sounds like you have used the Smith Manoeuvre.  I agree that turning your trapped equity into other investments and making the interest tax deductible is a good strategy.  However, had you followed Mr. Turner's "the Strategy", which it sounds like you did, back when his book came out you would have invested in Nortel and other tech stock and lost money.  The market has been really strong over the past few years and his advice there worked out well. 

And Canadian Couch Potato? If that is what you did it is not what he is known for recommending.  Did he recommend this to you or did you find it from other sources?.  If you contact him for fee-based services it seems that you are not going to be referred to Canadian Couch Potato: http://canadianmoneyforum.com/archive/index.php/t-11763.html
http://www.advisor.ca/my-practice/holmes-winton-garth-you-dont-impress-me-much-1687

What he is most known for is recommending that you sell your home, invest the proceeds and wait for a crash while renting - which he predicted would happen many years ago.  It might work out that way one day, but we might have a long flat market with low interest rates too.

So, as far as who I take advice from, I do my own research.   I don't rely on anyone without independent verification and research.

I do this for real estate and have learned through my own experience - I've written about this on the blog in lots of spots. 

I invest in Canadian Couch Potato as a result of advice received online from multiple sources.  I ordered the book first and read it. I'm not a sophisticated stock investor and I haven't put the time in to feel like I could do better than this.

I participate in the Smith Manoeuvre as I read the book about ten years ago.

In terms of corporate investments, I tend to spend a fair bit of time reading CGA columns and the associated CRA tax bulletins.  I do the same for taxation issues related to various investments.

I don't use an investment advisor.

5inatrailer

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Re: House Purchase - Calgary
« Reply #10 on: June 01, 2014, 01:51:49 PM »
Dance off!

I don't use an investment advisor either.

I read his blog daily, and it doesn't come across to me as "sell everything and wait for the market to crash" It comes across as :
don't put all of your eggs in one basket. RE is necessary, but not to the detriment of your retirement portfolio.  Whats riskier: living within your means now, or running out of money when you're 70? Should you really spend 800k on a house when you have to TFSAs, no pension, and little to no RRSPs?

It seems like most people on here get the concept, and live within their means. OP included.  We spend a lot of time with MMM's concept of "tiny details exaggeration syndrome"...of living frugally.
(see posts on :save $$, shower less!)

One of the better books I read was "stop working now" which was written by a dude who invested in dividend paying stocks in his 20's and retired off the income in his 30's.

I don't use Garth as a fee based advisor.  One day when I get 500k cash, I might.
We have 3 busy little kids, so I don't read $hit on investing individual stuff. Which ironically, Warren Buffet endorses- I'm sure you've read his latest letter...

OP: have a great summer, take your time- stuff comes up, it always does sooner or later Be the one with cash in hand to scoop up the house you've been waiting for.
We bought our used minivan from someone who lived approx 34ave SW in some rich lake/river area just west off maclead tr.  Beautiful neighbourhood.

Ok, back to tiling my new walk in shower MMM showed me how to do!

totoro

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Re: House Purchase - Calgary
« Reply #11 on: June 01, 2014, 02:07:01 PM »
Yes, I read Derek Foster too and get his email updates.  His information on dividend investing is useful, but I have not implemented it myself. 

I also read "Stop Working: Start Living" by Dianne Nahirney - another Canadian who retired early at 36 and lives near Toronto: http://www.amazon.com/Stop-Working-Start-Living-Retired/dp/1550224840   Also, the Wealthy Barber.

If we are talking about frugality - the biggest influences for me were Tightwad Gazette and Your Money or Your Life.  MMM site introduced me to the 4% safe rate of withdrawal which was a new concept, and affirmed that Canadian Couch Potato was an okay way to go.

What I don't like the most about Garth Turner is that I perceive his site as marketing tool couched as guru-like investment advice.  He skews and cherry picks "facts" that support his position and does not really do the math in an objective manner like MMM does.  He has also been consistently wrong about the RE market.