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July 31, 2019 | Choices

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.

Yesterday’s post referenced a honkin’ big white motorhome with a couple of blog dogs at the wheel who rolled into my day. Turns out it was Eric and Kylie. Now I know their story. This just arrived:

Can’t believe we met yesterday like that… especially during Bandit’s bowel movement! And I didn’t even have to do the obligatory suck-up to be mentioned in your blog! Like most everyone probably, we know you but you didn’t know us. .Started reading your blog long ago. Loved your advice of living within your means, staying out of big debt, renting instead of owning if it’s cheaper even when society thinks you’re crazy, and saving and investing to take the extra stress out of life seeing that many of our problems are financially caused. Your take on the overall housing market insanity and FOMO mentality was bang on! Especially as we were living in the Okanagan and Vancouver areas and saw it first hand…

Worked for the same company for 30 years in sales. Rented in the Vancouver area for the last 10 years, because renting was FAR cheaper than owning. Put the difference each month into savings. Don’t own real estate in Vancouver, but have a couple rentals in Phoenix AZ which we bought when the prices were low and the dollar on par (that was my wife Kylie’s great advice!)

So move the clock forward to now….. as we just became empty nesters, and as we decided to move to Australia, we figured what a great time to do a sabbatical and see our great country of Canada! We sold everything, quit my job after 30 years (on a high point!), and hopped in our motorhome and are now taking 9 months off to do so as I wait for my Australian immigration visa to come through!

As I took your advice over all these years, we saved up for this time and are now financially able to do it. What a great feeling to do this now in our 50’s while we are still young and healthy enough to do it. No kids, no job, no house, no cars, just the motorhome and having a blast. Almost 11,000 kms so far and we haven’t even made it to Newfoundland!”

I got pix, too. E&K smiling on Parliament Hill. E&K happy in a campsite. And a fetching shot of E&K’s bloated bus in front of a mountain. And now off they go Down Under.

So let’s contrast the screw-it-we’re-off-on-an-adventure choices E&K are making with the dismal, desperate real estate reality of Bill and Teresa Rambold, a Calgary couple whose lives have been ruined by a house – their dream home, now tenanted and sinking.

Construction started five years ago in the tony Mount Royal hood, just as Alberta went into a funk and the housing market croaked. The place cost $3 million to build, but shortly after completion was assessed by the city at $1.6 million. Ouch. Drowning in debt, B&T are unable to sell the place for enough to cover liabilities. Trapped. They’re prisoners to a home they apparently cannot afford to even live in. It’s a classic example of how much risk there can be in recklessly pursuing a one-asset strategy (as most Canadians do).

Now they hope to claw their way out with a form of crowd-funding. Their salvation will come if least 100,000 people will send them $35 and a cutesy pet picture. The winner gets the house. B&T get $3.5 million to pay off their debts. Two runners-up receive fifty grand each. Plus there may be a hundred left over for animal charities. The concept isn’t new, since a handful of other Canadian couples have tried this when confronted with a house nobody wants to pay for. But there’s no evidence the strategy has succeeded. Nor is it likely this time. However full marks for glitz and creativity, as you can witness at the official, begging web site.

Two couples. Two divergent paths in life. Freedom and flexibility on one hand. Indenture and stagnation on the other.

If you’re lucky, real estate can build wealth. If you’re unlucky, it can destroy you. And the things which dictate this outcome – monetary policy, bank rates, economic conditions, commodity markets, political changes – are beyond the control of any one person or family. Unlike having a diversified liquid portfolio, putting all net worth in a single, leveraged asset can be financially fatal. Asking strangers to bail you out must be humiliating. And futile.

RV or mansion? No brainer.

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July 31st, 2019

Posted In: The Greater Fool

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