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March 26, 2018 | The Bad Ideas

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Yay, I know. The Dow went up more than 650 points on Monday. It was the biggest romp in three years. And speaking of romps, over 21 million people watched Stormy Daniels talk about having sex with the Trumpster. That was the largest audience for 60 Minutes in a decade. Yuge.

Trump, Trump and more Trump. As stated here Friday, it just never ends. Last week the market croaked thinking about a trade war. This week massive relief as the White House walked it back. Now the sex stuff is trending as Americans start thinking about the coming mid-term elections. The next six months could be epic.

But this post will not be about the orange guy. Instead, let’s talk about how much it sucks being 30something. After bringing up this subject a few days ago, this pathetic blog’s been bombarded with moisters begging to be abused on GreaterFool. They shall not be refused.

“My wife and I have read your blog for a few years now,” says Carlo. “We are almost 32 years old and have a 1 year old kid (more coming) and a dog. My salary is $111,000 and my wife is $102,000.  We’ve been renting in Toronto and are getting kicked out (for the third time) as our landlord is selling the property to cash out. More than ever we are panicking and are about to talk ourselves into buying a $950,000 detached home in Markham (more than we ever planned to spend).

“We have $388,000 in cash/invested assets with no debt. For this house we would be putting a down payment of $225,000. What do you think? Once you start looking at houses it is easy to talk yourself into a bad idea – which is what we think is happening.”

There’s so much wrong with this, Carlo. You’re planning to walk into a $950,000 deal which will end up costing you more than $4,000 a month for financing and property taxes alone, plus giving up the use of a quarter million dollars – and doing it while ‘panicking.’ This is probably double the amount you’re now spending on rent, and will erase two-thirds of your savings. Plus, with more bambinos on the way, your household income is likely going south.

And Markham? Seriously? The place is a smoky hole after housing’s hard landing. Sales last month for detached homes were down 45.2% and listings bloated by (get this) 206%. The average price is plunging – down 27.6% from last year (and falling fast). In other words, if it were not panicking urban nobs like you, nothing would be changing hands.

Dude. If you want a house in the burbs, rent one. Take some time. Shop around for a few months. Wait for rates to rise and for the blood of sellers to be staining the gutters red. Then we’ll talk.

“I need your advice,” says Jeremy, in a blistering understatement.

“My fiance and I are getting married this year August. We are looking to purchase a detached home in the GTA (Peel Region), only if the prices come down significantly. If this were up to me, I would rent a condo and invest the money in a balanced portfolio. However, life is not that simple and my fiance is laser-locked on buying a home.

“She is 25 and I’m almost 28 and combined we have close to $100k saved (in TFSA) and no debt. We need to make a decision by August of this year on whether or not we are buying a house. I make $70k a year and my wife makes $55k a year. A few banks said they would approve us for $550k mortgage. After taxes, we take home just under $80k.

“I know my fiance doesn’t want to rent, but I’ve checked out some homes anyways. For the ones that I liked, they were about $3000/ month all inclusive. That’s $36k a year spent on just rent. Insane. Yeah sure we can get something cheaper, but it wouldn’t be the quality we desire. As I write this, I realize I probably sound like one of these greater fools, but it’s a tough decision to make. What advice can you provide me?”

Let’s recap, shall we? Your 25-year-old fiancé refuses to rent even for $3,000 a month (when two grand will get you a swell place in Mississauga), and wants a $550,000 mortgage instead on a $650,000 house. That would leave you with zero savings and a monthly overhead of $3,500, which is more than 50% of your net pay. If one of you loses a job, screwed. If she gets pregnant and goes on mat leave, followed by $20,000 a year in daycare costs, screwed. If you renew your mortgage at 3% higher in five years, screwed.

So why would you start off a stressful new chapter in your lives (married) with even more stress? Speaking of which, are you sure about a person who makes such a demand, plus laying down a deadline? What if you give in and act against your better judgement? What if you don’t? Is this really the pattern you wish in place for the rest of your life? Do you want to start off a relationship with conflict, debt and bullying?

Just asking. I think we may have a spare bunkie in the blog tool shed if you need it.

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March 26th, 2018

Posted In: The Greater Fool

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