# My Diary - Starting to track progress



## vicky1 (Apr 5, 2016)

Hi All,

I have been reading this forum for a while and would like to start tracking my financial progress and meet the short/long term goals. Married for 6 years with 1 child (3 yrs). Both me and my wife have government jobs. I am 34, she is 32. We live in a 4 bedroom semi-detach in GTA and own another 4 bedroom semi detach as an investment property (our previous residence). Due to some health setbacks to my wife and my son, we have not been able to ‘save’ much out of our salaries for the past 3 years. 

Combined salary: $150k

*Assets:
*Primary Residence: ~$800k appraised by bank
Investment Property: ~$750k appraised by bank
My TFSA: ~$15k 
Her TFSA: ~$15k
My RRSP: ~$10k
Her RRSP: ~$10k
Son RESP: ~$10k
Cash + emergency fund: $25k

Total Assets: 1.635 Mil

*Liabilities:
*Primary home mortgage: $493k
Investment mortgage: $398k

Total Liabilities: 891K

Net Worth: 744k

*Long term goals:
*-Retire by 55
-pay off 1 property by 55 and invest the proceeds in index funds
-live a happy and healthy life

*Short term goals:
*-NW of 1 million in 5 years
-NW of 2 million in 10 years

Some notes:

-I have not included other assets like cars, pensions in the above list. I do not think I will be saving much of our income till the end of 2017 (son starts school) so I would like to increase by assets accordingly and pay them off when the savings start coming in. 

-I did loose quite a bit of money trading recently (around 50k). I am over the addiction of trying to get lost money back. All my TFSA and RRSP funds are now in TD E series index funds equally distributed. 

-Yes, I do know that the net worth is very RE focused. I am breaking even on the investment property rent. Now, I do have the ability to rent my current property easily as its centrally located and the rent will cover my expenses. With basement rented, I can even get $400 of cash flow on the primary residence.

Next Steps:

Option 1:

Book/Buy a third property and rent the current primary residence? Heloc will cover the 20% down. Its risky but doable. I do have a long term of view of these properties as they are bought in prime locations close to subways, GO train stations etc. 

Option 2:
Stay put. Rent the basement for $800 and pay off primary residence.


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## mordko (Jan 23, 2016)

I wouldn't leverage myself any further for the sake of even more real estate investment, but that's just me. 

Like you say, you have most of your assets in RE, at the time when Toronto RE is looking a bit shaky, so why not diversify? We've had a nice jump in house prices over the last 12 months. That surely lowers prospects for long-term returns going forward.


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## james4beach (Nov 15, 2012)

Hi vicky, welcome to the forum and thanks for sharing.

That's a pretty impressive net worth for two people in their early 30s! Good job on getting to this spot. For those of us who are trying to learn from other's experiences in life, can you share how you got to that spot? Has real estate appreciation been a big factor in this?

As mordko says, I'd be careful about your leverage. You might want to track this figure and work on reducing it: leverage = assets / net worth = 1635/744 = 2.2

That 2.2x factor is an amplification factor. Consider what happens if your assets decline by say 20%. Based on the leverage multiple, you would see a decline in your net worth of around 2.2x20 = 44% which would be quite unfortunate and possibly make you feel bad.

I think your Option 1 is too risky. Personally I would go the route of decreasing your leverage and diversifying your asset exposure


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## cashinstinct (Apr 4, 2009)

Congrats on current position

____

At mortgage renewal, I would consider having a higher mortgage on the investment property that is tax deductible, and a lower mortgage on your home.

Get advice from your accountant before doint it.

Interest on your rental is deductible on your tax return.

___

I would not buy a 3rd property. Toronto RE might increase again and again in the future, but you seem exposed enough already.

You only break even on your current investment property.

An issue with Option 2 is that a portion of the future sale of your home will become subject to tax (the portion you rent), but $800 a month is good income.

____

I would invest in e-series funds the money you are able to set aside (or the $800 a month for example). 

You say you don't count "Pensions"... what kind of pension you and your wife have? DB pension plan ? What is the minimum age for retirement without penalty?

Your RRSP/TFSA balances are relatively low if you don't have a good pension plan at work, if you plan to retire at 55.


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## vicky1 (Apr 5, 2016)

Hi Mordko, James. Thanks for the inputs. Yes, I do consider it risky to add another property but as I did with my previous two properties, the new property will be in excellent location near top schools and transportation, the risk can be mitigated long term. I am not in a hurry especially with the new regulations kicking in. My theory is to be as leveraged as possible and pay the least amount of mortgage myself. 

James, real estate has been a big factor in this. My wife says she does not know anyone who has made money in trading stocks and everyone we know who is/has done well, is because of real estate. The NW figure should be in millions if we knew what we know now. Kevin O’leary is right, the education system puts zero focus on money, investing and savings. 

In 2010, when we got married, we had about 50k in savings in our RRSP with no student debt and were looking for a house. Real estate looked very expensive at that time also. Somehow, we did some calculation to save up for 20% down payment while we bought a condo as an investment in downtown Toronto. Boom, within two years, the houses we were looking were up 100k (equal to our savings living with parents for those 2 years). 

Took action. Bought first house in 2012. Sold our condo next as we did not see appreciation and the maintenance fees was going up. From the proceeds of the condo and refinancing on our 1st house, we were able to purchase our second house. CBC recently nailed it, its not the foreign buyers that’s inflating the prices, it’s the domestic buyers causing the supplying constraint by not selling their properties. 

Lessons learned:

-	Save, Invest, Repeat. No credit card debt. Pay off that student loan. We worked through our high school/university to achieve that.

-	Do not trade individual stocks. Just DON’T. Invest your hard earned money in boring index funds and you will beat 95% of these investment guru’s in the long term. If you want to trade stocks, learn options and protect your downside. It makes me wanna puke when I think about the 2008 financial crisis, so many people lost all their savings in an instant. I was just following the markets and these wall street crooks sucked the life out of average joe investor. Who is getting these billions of fines that the US financial system is paying out, not the average joe investor.

-	Don’t wait for the market crash is both stocks and/or real estate. Start somewhere. My tenants are late 30s couple with 2 kids with income of +200k. They sold their paid off condo in 2011 waiting for a real estate crash. What do you do when you have money in bank? You invest in individual stocks (not diversified enough) and loose. Now, with real estate up 80-100% in that timeframe, they are looking for a house. They will buy when housing comes down 15%, and sell when suddenly the housing crash goes to 40%.

Mistakes:

-Not knowing much of investing in the 20s. Not saving enough.
-trading individual stocks.
-Waiting for market crash in stocks and real estate

Inspiration: We used to see these educated late 30s couple with family live across our house always so stressed out. One day, I saw this old south asian man, driving his 2001 corolla park in front of their house. He walked up, picked up envelope from the mail box, then sat in that corolla and counted cash. He gave me a big smirk while he went to the next house doing the same. Later, I found out the couple had been renting the house for the last 5 years for $2000 a month (WTF moment).

I might be proven wrong with this strategy, but I would mitigate that risk by investing long term. I do know that I need to be diversify my asset allocation (also looking to invest in a business instead of 3rd property).




james4beach said:


> Hi vicky, welcome to the forum and thanks for sharing.
> 
> That's a pretty impressive net worth for two people in their early 30s! Good job on getting to this spot. For those of us who are trying to learn from other's experiences in life, can you share how you got to that spot? Has real estate appreciation been a big factor in this?
> 
> ...


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## vicky1 (Apr 5, 2016)

Hi Cashintinct, thanks for the inputs. 

1) Wife's a CA
2) Selling the house is not an option till the next 30 years.
3) they are government pensions, hopefully will help me in retirement. I just don't see them assets. Minimum age is when you started + 30. TFSA balances are low because of stupid trading addiction. Once the savings and indexing kicks in, hopefully they will start going up. 




cashinstinct said:


> Congrats on current position
> 
> ____
> 
> ...


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## mordko (Jan 23, 2016)

> My theory is to be as leveraged as possible and pay the least amount of mortgage myself.
> 
> James, real estate has been a big factor in this. My wife says she does not know anyone who has made money in trading stocks and everyone we know who is/has done well, is because of real estate.


Yes, GTA real estate has done tremendously well over the last 20 years. That is exactly why, going forward from this point, we should assume a much, much lower return. Have a look at this trend: http://www.torontohomes-for-sale.com/4a_custpage_2578.html. Note that the plot does not show the huge jump we've had in 2016.

Everything tends to get back to averages, so we'll get back to the long term trend sooner or later. When we do, the price will overshoot the trend and drop too far; that's how human psychology works. So, a drop by 50% from the current levels isn't out of the question (although I don't believe it is likely). If that happens, rent prices would drop as well. Do a stress test on your finances and see if you can still keep above water, particularly if you get another property. 

What you are saying is coloured by the recency bias. It's been a long time since the last price drop so we forgot about it. 

Furthermore, long term shares tend to outperform real estate. 

The strategy of not trading individual shares is a good one. In my opinion you should not put all your eggs into real estate but obviously it's your call.


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## nobleea (Oct 11, 2013)

cashinstinct said:


> At mortgage renewal, I would consider having a higher mortgage on the investment property that is tax deductible, and a lower mortgage on your home.
> Get advice from your accountant before doint it.
> Interest on your rental is deductible on your tax return.


That's a blanket statement which is not entirely accurate. It would depend on what the additional funds are used for. If they are used for an investment for which interest is deductible, then yes, the new rental mortgage would be deductible. If the additional funds are used for something else, then the portion of the interest associated with the additional funds would not be deductible.

It doesn't matter what the mortgage is charged against. Only what the funds are used for. That's what determines interest deductibility.


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## cashinstinct (Apr 4, 2009)

vicky1 said:


> Hi Cashintinct, thanks for the inputs.
> 
> 1) Wife's a CA
> 2) Selling the house is not an option till the next 30 years.
> 3) they are government pensions, hopefully will help me in retirement. I just don't see them assets. Minimum age is when you started + 30. TFSA balances are low because of stupid trading addiction. Once the savings and indexing kicks in, hopefully they will start going up.


1) As said by nobleea, interest deductibility should be looked at depending on use for funds, I don't want to give advice on this issue. Ask your wife 

2) Even if selling house is not an option right now, any year that you rent basement, the % of house that is related to this rental use will be taxed for capital gains. It might not be significative, but it's something to consider whether you decide to rent or not the basement. Keep good records of the years you rent Vs do not rent, and you should get formal information about the fair value of your house before you start renting and have it in your "permanent" files to have this information in 30 years (ask your wife!  )

3) Having government pensions is huge in your financial planning. You don't have to list them in your net worth in $$$, but they make your goal to retire at 55 more realistic.

For your investment accounts, you can't change the past. You seem to have a good plan going forward.


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## vicky1 (Apr 5, 2016)

So, As per my original post, i went ahead with option 1. Booked a detached house for 1 Mil in another GTA location and built in a 'legal' kitchen in the basement of our primary residence. The new location works perfectly for me and my partner (halfway to our jobs).

I have not yet decided what I will do when I will get the new house ( Keeping all three might be not be possible but nothing is impossible). I got in on the first day of sales at this location. Prices approx are already up 200-300k from the 1st day VIP booking. *Ofcourse, this is not sustainable.* 

Step1:
Next step would be to rent the basement starting September when son starts his school and save up to avoid tough times if market turns. 

Step2:
Enough of RE, any good business ideas?


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## vicky1 (Apr 5, 2016)

Happy new Year Everyone! Quite an interesting turn of events in real estate…Almost hit 1 Mil in March of 2017 at the peak of real estate mania. 

Rents have gone up. Basement is rented for $1100 in primary residence. Planning to have a surplus of $1300 if we rent the current primary residence (Dividends)! 

New house is delayed till Fall 2018 (Great)!! Most of the savings of 2017 went to creating the legal basement and trip to Spain and Portugal  New house still worth around 1.1-1.2 Mil at current prices. I will add it to the assets when I get it. Until I get our new house, we are accelerating on savings to get the debt down. Got a promotion at work so would be easier to qualify for the mortgage. 

Let’s do an update with current prices:

Combined Salary: 164k

Assets:
Primary Residence: ~$850k 
Investment Property: ~$800k 
My TFSA: ~$15k {cash}
Her TFSA: ~$15k {cash}
My RRSP: ~$11k {TD e series}
Her RRSP: ~$11k {TD e series}
Son RESP: ~$13.5k {TD e series, Valeant Pharma (lol)}
Cash + emergency fund: $25k

Total Assets: 1.740 Mil

Liabilities:
Primary home mortgage: $480k
Investment mortgage: $388k
Deposit on new house (Heloc): $100k

Total Liabilities: 968K

Net Worth: 772k

Long term goals:
-Retire by 55
-pay off 1 property by 55 and invest the proceeds in index funds
-live a happy and healthy life

Short term goals:
-NW of 1 million in 5 years
-NW of 2 million in 10 years


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## Steve Divi (Jul 14, 2016)

You are very heavy in RE

I live in Vancouver and would not touch real estate with a 10 foot pole right now. Things might look brighter in GTA so you might be doing the right thing. It just seems a little bit reckless to have a cool Mil in Liabilities while your combined income is so low and interest rates are on the march up.

1 Million at 5% is $6,000 per month on a 25 year mortgage....

I hope it all works out well for you and we're not finished the cycle.


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## peterk (May 16, 2010)

Steve Divi said:


> I hope it all works well for you and we're not finished the cycle.


Gee, why would it be over Steve? 

Aren't you enjoying this lovely Canadian tale of a young family with middling incomes buying as much real estate as humanly possible, keeping savings to a minimum, and ending up in their mid 30s with a net worth as if they were a top 40 under 40 Doctor/Lawyer power couple? I'm sure it's going to continue like this indefinitely.  Vic's own estimation is some 200k in real estate appreciation in 5 years and 800k more in 10 years. Why not??

What could possibly go wrong?


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## Steve Divi (Jul 14, 2016)

peterk said:


> Gee, why would it be over Steve?
> 
> Aren't you enjoying this lovely Canadian tale of a young family with middling incomes buying as much real estate as humanly possible, keeping savings to a minimum, and ending up in their mid 30s with a net worth as if they were a top 40 under 40 Doctor/Lawyer power couple? I'm sure it's going to continue like this indefinitely.  Vic's own estimation is some 200k in real estate appreciation in 5 years and 800k more in 10 years. Why not??
> 
> What could possibly go wrong?


I sense sarcasm...
:sneakiness:


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## peterk (May 16, 2010)

Sorry for ribbing Vic. I hope everything go well with the new purchase.


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## vicky1 (Apr 5, 2016)

Hi Everyone,

Happy New Year! It's been about an year I provided an update. We finally got the new house and welcomed our second child! Wife is now off for 18 months with the employer covering > 90% of income for 10 months. Rents have gone way up for the properties. A lot of house flippers did get stuck with the market turning but seems like the increase of rents (thanks for Wynn) has bailed them out by renting their new properties. On my investment properties, I was able to renew in summer with variable rate of 2.35. Even though variable has gone up, it has kept my monthly expenses low.

Here is an update with Current prices:

Primary Residence: ~1.05-1.1 mil [This was easily 1.35 in 2017]
Investment Property 1: ~800 k
Investment Property 2: ~850+ k (appraised dec 2018)
Combined TFSA: ~35k (Stocks, TD e seires)
Combined RRSP: ~ 23k (TD e series)
RESP: ~17k (TD e seies)
Cash + Emergency fund: 25k

Total Assets: 2.8 Mil

Liabilities:

Primary home mortgage: $800k
Investment mortgage 1: $380k
Investment mortgage 2: $468k
Heloc on investment 1: $250k

Total Liabilities: $1898000

Networth: $902000

Yearly increase of about: 15%

Long term goals:
-I retire at 55.
-pay off 1 property by 55 and invest the proceeds in index funds
-live a happy and healthy life

Short term goals:
-Wife retires at age 40. Starts her own accounting business.
-NW of 1 million in 2022
-NW of 2 million in 2028

Now, my first investment property rent covers the mortgage and taxes but second one which is in a great location is now 2 units where the total rent is $3700 and my expenses are about $2500. The extra $1200 covers for the interest I pay on the HELOC. Our next step will probably be downsizing to our 1st investment property in about 4-5 years and create a 2nd unit there. That should be enough for my wife to retire and give an opportunity to someone else to get a job. She is more business oriented so she might start an accounting business but we will see. 

Happy Investing!


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## vicky1 (Apr 5, 2016)

peterk said:


> Sorry for ribbing Vic. I hope everything go well with the new purchase.


Thanks Buddy. All went great with the new house!! Msg me if you want to come over for BBQ in summer. No sarcasm here


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## vicky1 (Apr 5, 2016)

Hi Everyone,

Housing market is rebounding in GTA. Here is an update with Current prices. As it's harder to get mortgage, thinking of making the current primary residence property as a rental with 2 units and move back to my 1st rental residence which is close to my family. That's the plan for now but might change if the market heats up (might sell it). Made a short trade on Snapchat on TFSA which is working out quite nicely right now. Bought a new car and some travel expenses (norway, prague) on Heloc investment 2. 

Primary Residence: 1.2M
Investment Property 1: 850k
Investment Property 2: 900k
Combined TFSA: 60k (Stocks)
Combined RRSP: ~ 25k (TD e series)
RESP: ~22k (TD e series)
Cash + Emergency fund: 25k

Total Assets: 3.082 Mil

Liabilities:

Primary home mortgage: $794k
Investment mortgage 1: $375k
Investment mortgage 2: $463k
Heloc on investment 1: $250k
Heloc on investment 2: 50k

Total Liabilities: 1.932 Mil

*Networth: 1.15 Mil*

Increase from start of the year: 27%

Long term goals:
-I retire at 55.
-pay off 1 property by 55 and invest the proceeds in index funds
-live a happy and healthy life

Short term goals:
-Wife retires at age 40. Starts her own accounting business.
-NW of 1 million in 2022 
-NW of 2 million in 2028

Looking into ways to increase my cash flow and balance sheet. The high debt on primary residence will make it harder to qualify for next investment mortgages. Looking to invest in condos and or other 2 unit properties. 

Happy Investing!


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## Emjay85 (Nov 9, 2014)

vicky1 said:


> Hi Everyone,
> 
> Housing market is rebounding in GTA. Here is an update with Current prices. As it's harder to get mortgage, thinking of making the current primary residence property as a rental with 2 units and move back to my 1st rental residence which is close to my family. That's the plan for now but might change if the market heats up (might sell it). Made a short trade on Snapchat on TFSA which is working out quite nicely right now. Bought a new car and some travel expenses (norway, prague) on Heloc investment 2.
> 
> ...


What are the HELOC's used for?


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