# 21 and 23 Year Old's Diary



## jordan_paul (Jul 1, 2013)

Hi there, I'm a 21 year old 3rd year electrical apprentice and my wife is a 23 year old Registered Vet Tech and we live in South Western Ontario. I've been investing for a few years but most of my savings were wiped out when I bought my house last month. So far I've been buying and selling hard assets (gold, silver, copper) and mutual funds. I have no intentions of playing the stock market but I plan to start investing in rental properties and land within the next three years.

Income:
Myself: $48 000 yr*
Wife: $35 000 yr

Assets:
Checking Account: $200
Savings Account: $4 500
TFSA: $1 000
DB Pension: $15 000
Mutual Fund: $1 000
House: $180 000
Gold/Silver: $10 000
Tools: $25 000
Wifes Car: $12 000

Total: $260 700

Liabilities
Mortgage: $165 000 (2.89% fixed for five years)
Truck Payment: $21 000 (3% variable)
Wife's Student Loan: $25 000 (prime+2%)

Our immediate goal is to pay off my truck and my wife's student loan by the time we buy our first rental property. By the time I'm 30 I want to have three duplexes and by the time I'm 35 I want my first mortgage paid off.

*wage will increase to roughly $56k/yr when I reach 4th year in about six months time. Then an increase to $65k/yr when I reach 5th year then finally an increase to $80k/yr when I become licensed and this is guaranteed.


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## Ponderling (Mar 1, 2013)

Learn the hard way what an asset is. - In my book it is something you can sell and still carry on relatively unchanged in your day to day life. 

Tools - you might have sunk $25 into them, you wont get that out of them, and you wont have anything near current employment income if you do.

Wife's car - it might be paid off, but most just consider that a holiday from payment, not an asset. See how much she smiles when you tell her you need to sell it.

Get a better handle on what is what - TFSA is a tax advantaged vehcle for saving money. Anything can be held in it. 

You list mutual fund as a separate asset. Get it in the TFSA. Likely not a compelling case for RRSP's for a little while until you income starts to climb. 

Gold silver - if this is personal jewellery, then not really an asset until you are prepared to sell it.

If bullion, well, bad timing , and limited up side on price at present, so maybe sell it, take the loss and put it into a performing vehilce with upside potential inside your TFSA.



Get you cash flow sorted out, and work on building a more substantial emergency fund; it can be inside the TFSA.

Get used to saving, because you are likely not going to find a sub 3% mortgage when it is time to renew, and mortgage payments will be higher by then.


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## the-royal-mail (Dec 11, 2009)

> By the time I'm 30 I want to have three duplexes and by the time I'm 35 I want my first mortgage paid off.


Canada's RE bubble a la USA 2007.


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## Feruk (Aug 15, 2012)

First of all, life has no guarantees. Future earnings expectations should not justify present investments. Having said that, I'm sure it's likely you'll get there, just don't count your chickens before they hatch. If you want to count the tools, you should assume you'd have to fire sell them and discount them appropriately (67%+). You're probably gonna sink a lot of money into maintainance on car, so that's not an asset either.

Why do you hold mutual funds? You should put it all into TFSA as stated above. Also, you don't want to play the stock market, but you're trading commodities?? That's way more risky! 

Lastly, I also think your expectations of owning three duplexes (6 houses) by 30 is not realistic. You currently don't even own 10% of your house. I think the system of the last 5-10 years that allowed you to buy a house for under 20% down and get money at such a low rate is going away quickly as interest rates rise. If I were you, I'd sit back for the next couple years, save some cash, and watch what happens to people who have over-speculated in a low interest rate environment.

Lastly (and this is probably the biggest one), TRAVEL! You're only 21, so explore the world a little. Go somewhere outside North America. That type of experience you will never get sitting here. Until you've got some experiences to look back on, you're too young to be worrying about retirement.


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## jordan_paul (Jul 1, 2013)

Ponderling said:


> Learn the hard way what an asset is. - In my book it is something you can sell and still carry on relatively unchanged in your day to day life.
> 
> Tools - you might have sunk $25 into them, you wont get that out of them, and you wont have anything near current employment income if you do.


Technically an asset is anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value. Without those tools I wouldn't have a job therefore no income. They are the most important asset I own.



Ponderling said:


> Wife's car - it might be paid off, but most just consider that a holiday from payment, not an asset. See how much she smiles when you tell her you need to sell it.


Again, if we had to sell it we would be left with cash. If had to sell my truck we would be left with a bill.



Ponderling said:


> Get a better handle on what is what - TFSA is a tax advantaged vehicle for saving money. Anything can be held in it.
> 
> You list mutual fund as a separate asset. Get it in the TFSA. Likely not a compelling case for RRSP's for a little while until you income starts to climb.


You might be right about this, I'm going to go to my bank and ask about this sometime this week. I have no intentions on investing in RRSP's. For me I find properly selected mutual funds to be a better investment. 



Ponderling said:


> Gold silver - if this is personal jewellery, then not really an asset until you are prepared to sell it.
> 
> If bullion, well, bad timing , and limited up side on price at present, so maybe sell it, take the loss and put it into a performing vehicle with upside potential inside your TFSA.


I only buy one ounce gold and silver coins and bars. Why would I sell and take a loss? The values of gold and silver are only going to go up, as it has for the past 100 years. There's only so much left in the ground (in fact the worlds silver supply could be exhausted by 2030) so it would be stupid to sell it. Why I like it so much is because I can hold it in my hands. A company can go bankrupt and I could loose my investment but my precious metal is insured. For my investment strategy its a perfect long term investment.



Ponderling said:


> Get you cash flow sorted out, and work on building a more substantial emergency fund; it can be inside the TFSA.
> 
> Get used to saving, because you are likely not going to find a sub 3% mortgage when it is time to renew, and mortgage payments will be higher by then.


I have my cash flow nailed pal, I probably have it sorted out better then you do. And I'm working on my emergency fund but keep in mind I just bought a house, my savings account will be back to where I want it soon enough. And the mortgage rates probably will go up but even if my rate goes to 5% it will only increase my payment $178 a month. If the mortgage rates were to drastically increase to say 10% (would never happen anyways) it would only increase my payment $656 a month. Again not a big deal considering I'll be making a substantial amount more by then.



Feruk said:


> First of all, life has no guarantees. Future earnings expectations should not justify present investments. Having said that, I'm sure it's likely you'll get there, just don't count your chickens before they hatch. If you want to count the tools, you should assume you'd have to fire sell them and discount them appropriately (67%+). You're probably gonna sink a lot of money into maintainance on car, so that's not an asset either.


I agree nothing in life is guaranteed. I could fall off a ladder tomorrow and not complete my apprenticeship or the sky could fall down and we could get sucked into the sun but apprentices are paid on a scale based off of a journeyman's rate. First years are at 40% of the journeyman's rate, second year is at 50%, third year is at 60% etc. Every 1800 hours worked apprentices get a 10% raise. And because I'm in a union I could tell you what my hourly rate it to the cent until April of 2017. Going by the status quo of the last 50 years, my future earnings are pretty guaranteed.



Feruk said:


> Why do you hold mutual funds? You should put it all into TFSA as stated above. Also, you don't want to play the stock market, but you're trading commodities?? That's way more risky!


I hold mutual funds because I know a lot about them and it's easy to pick mutuals depending on my risk tolerance. I don't know jack about the stock market.



Feruk said:


> Lastly, I also think your expectations of owning three duplexes (6 houses) by 30 is not realistic. You currently don't even own 10% of your house. I think the system of the last 5-10 years that allowed you to buy a house for under 20% down and get money at such a low rate is going away quickly as interest rates rise. If I were you, I'd sit back for the next couple years, save some cash, and watch what happens to people who have over-speculated in a low interest rate environment.


I disagree with you here. I have three friends who are in the rental property game. One of them is my age and he had two houses, the second is 24 and he has a duplex and two houses and the third is 29 and he has 9 rental properties including a couple of duplexes, a triplex, a couple of houses and a 6 unit apartment building. They are making an excellent go of it and they all started with one house, then getting the second property 2-3 years after the first. They have never been in the same room together but they all seem have the same investment strategy. The biggest driving force behind why I want to get into buying properties is that shelter is a basic human need. All of my friends rental properties stay vacant for no longer then a few days between tenants. One put an ad on Kijiji for a unit in his duplex and he had to shut his phone off because that many people were calling to rent it. 



Feruk said:


> Lastly (and this is probably the biggest one), TRAVEL! You're only 21, so explore the world a little. Go somewhere outside North America. That type of experience you will never get sitting here. Until you've got some experiences to look back on, you're too young to be worrying about retirement.


I nor my wife have any intentions or interest in world travel. We have full access to over 500 acres to hunt on up north, family on both east and west coasts of the country and we have land to play on here at home. Those are experiences *you'll* never get vacationing overseas. Good call though.


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## Spudd (Oct 11, 2011)

Their point about the tools is that the 25k is not really part of your net worth, since it's not money that is accessible in case you need it. Not that the tools are not really an asset (of course they are). 

A TFSA and an RRSP are both just types of accounts, which you can put mutual funds into if you wish. With a TFSA, the gains on your money are not taxed. With an RRSP, you don't pay tax on the money you put into it, but you have to pay tax on it when you withdraw it later. 

Also, mutual funds generally contain stocks, so you are in the stock market already (unless your mutual fund is a bond fund or something). 

Take a look at the MER (management expense ratio) on any mutual funds you'll be buying. You want to minimize this as much as possible. The usual advice around here is to buy TD e-series mutual funds as they have the lowest MER's out there.


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## rd_aaron (Jun 24, 2011)

jordan_paul said:


> You might be right about this, I'm going to go to my bank and ask about this sometime this week. I have no intentions on investing in RRSP's. For me I find properly selected mutual funds to be a better investment.


RRSPs aren't investments. They're an account that you put investments in to defer taxes to your retirement (when you should have a lower tax bracket).



> I have my cash flow nailed pal, I probably have it sorted out better then you do.


Coming on here looking for advice and then responding with a smug attitude isn't going to get you much help. Some members here have more years of financial planning experience than you (and I) have been alive.



> If the mortgage rates were to drastically increase to say 10% (would never happen anyways)


The 5 year fixed mortgage rate was above 10% every year between 1973 and 1992. I bet people in the 1970s never thought the rate would go above 20% in the 1980s either.


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## Feruk (Aug 15, 2012)

jordan_paul said:


> I disagree with you here. I have three friends who are in the rental property game. One of them is my age and he had two houses, the second is 24 and he has a duplex and two houses and the third is 29 and he has 9 rental properties including a couple of duplexes, a triplex, a couple of houses and a 6 unit apartment building. They are making an excellent go of it and they all started with one house, then getting the second property 2-3 years after the first. They have never been in the same room together but they all seem have the same investment strategy. The biggest driving force behind why I want to get into buying properties is that shelter is a basic human need. All of my friends rental properties stay vacant for no longer then a few days between tenants. One put an ad on Kijiji for a unit in his duplex and he had to shut his phone off because that many people were calling to rent it.


The problem is real estate cycles last more than 10 years. In the last few years we have seen the lowest interest rates pretty much EVER. This means all those guys have seen the boom but don't understand what inevitably comes next. We've already been told to expect the rise in rates. Not a big deal, right? Dead wrong, it's a game changer. Say right now you bought a property for $400K at 3% locked in for 5 years (20% down). That leads to a payment of about $1,500/month (assuming some added costs for maintenace/taxes/etc). What happens if rates go up a meager 2%? Payment jumps to $1,820/month. What about the historic ~7%? Well you're at $2,140. So a rise of 4% means a rise of monthly cost of 53%!!! All these assume your payments stay constant for the first 5 years, then go up when you re-negotiate. But it gets A LOT worse. Say "Joe buyer" can only afford a payment of $1,500/month. Well, the $400K house is now WAY out of his price range at a 7% rate. He can now only afford to buy a $265K place. Guess what happens to the value of your $400K investment; it's now worth $265K due to supply/demand. But let's say you adopt the attitude of "heck, this has to go up eventually, I just won't sell." Five years comes around and you have to re-negotiate rate. You've paid the mortgage down to $293K. You've got two choices. Either re-negotiate at a "decent" rate of 7% and PAY THE DIFFERENCE of $32K between what's owed and what it's worth, or stay with the same lender ("grandfathering") without paying the $32K out of pocket, but pay an obsurd rate decided by the lender. Say you go with the second option, and they offer you a 9% rate. Well, you now pay $2,500/month (assuming first 5 years were at 3%). Well, you're not gonna get ANY sucker to pay that in rent because they can go out and buy the same house for $265K and only pay $1,500/month for it! So your "investment" is now costing you $1k/month on top of rent. This is realistic scenario and NOT a worst case scenario. Your buddy with 9 houses will experience the worst case scenario.

That brings me to one final point. Why does your friend's place get rented instantly? Some can't afford a house, but considering how high rent prices are, that tells me that a lot of people are terrified of exactly the above and are staying out of the real estate market for now.

You must understand that the housing market is very much like the stock market. There are cycles. Before you buy, do some research or you might wind up being the real estate equivalent of the guy that buys a stock at the all-time high.


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## the-royal-mail (Dec 11, 2009)

Great post Feruk. This OP is following the pattern or so many newbies before - mind already made up before posting on CMF and not interested in dissenting opinions but on picking apart opposing statements via the quote function. They are not here to learn unless it's to encourage them to do what they have already decided.

Not a good approach for someone who doesn't even understand MFs, TFSAs and RRSPs.

But, best of luck.


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## blin10 (Jun 27, 2011)

_"I only buy one ounce gold and silver coins and bars. Why would I sell and take a loss? The values of gold and silver are only going to go up, as it has for the past 100 years. There's only so much left in the ground (in fact the worlds silver supply could be exhausted by 2030) so it would be stupid to sell it. Why I like it so much is because I can hold it in my hands. A company can go bankrupt and I could loose my investment but my precious metal is insured. For my investment strategy its a perfect long term investment."_

mistake #1, buying physical gold/silver when you have a ton of debt
mistake #2, instead of buying gold company that you think can go bankrupt you can buy GLD ETF.... when you hold physical metal when you want to cash out you need to sell it to someone (and it won't be at market price that's for sure)

_"I have three friends who are in the rental property game. One of them is my age and he had two houses, the second is 24 and he has a duplex and two houses and the third is 29 and he has 9 rental properties including a couple of duplexes, a triplex, a couple of houses and a 6 unit apartment building. "_

I know how teenagers talk, like the saying goes "never believe what they say and only believe half of what you see"... I have few buddies like that, talk mad game how their business so successful but in reality it's all BS, and the funny part is they still talking sh!t


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## bflannel (Apr 21, 2013)

Can I apologize now for my generation CMF? There are those of us that want to learn and will readily ask and appreciate your help. More often than not though I'll just lurk in the background where I belong :hopelessness:


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## Young&Ambitious (Aug 11, 2010)

Knows a lot about mutual funds but not a lot about stocks? You'll have to explain this one further as mutual funds are stocks. You should do some reading up about the TD e-series mutual funds and the Canadian Couch Potato method.

Do you guys have insurance? Being in a union I would imagine so, but it's worth looking into what you have and asking if it is sufficient.


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## crazyjackcsa (Aug 8, 2010)

I'll take a slightly more sympathetic approach, and I'll keep in mind you never actually asked any questions.


Your income is set to rise substantially. As others pointed out, it may not. But it probably will. So, in two years, household income will be up over 100k a year.

Assets: Cash poor. Makes sense since you are starting out.

Here's what you need to avoid: Being too smart by half. Gold? Really? Why? Because it's "sexy"? Forget it. 

Your sitting on a pile of debt, with very little cash in case of emergency. You can't hawk your tools is the roof of the house caves in.

Forget the real estate, forget the gold and start paying down debt/investing.

Why would you want the headache of dealing with upkeep on properties and tenants? The intricacy of buying and selling a physical commodity? Keep it simple. You're going to make good money. Invest it and call it a day. While your friends are dealing with deadbeat tenants, or rising interest rates and cash flow issues, you won't be.

Want to make a move to a different city to make more money? Pick up and go and not worry about finding a management company or selling the real estate.

Why make it complicated?


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## jordan_paul (Jul 1, 2013)

rd_aaron said:


> Coming on here looking for advice and then responding with a smug attitude isn't going to get you much help. Some members here have more years of financial planning experience than you (and I) have been alive.


Read my OP again, very slowly. Sound out the words. As far as I can recall I haven't asked for advice yet.



rd_aaron said:


> The 5 year fixed mortgage rate was above 10% every year between 1973 and 1992. I bet people in the 1970s never thought the rate would go above 20% in the 1980s either.


The Bank of Canada has stated they will never let the 20% mortgages happen again. They also stated they could only raise prime a quarter point per yearly quarter. I'm still not worried about it.



Feruk said:


> That brings me to one final point. Why does your friend's place get rented instantly? Some can't afford a house, but considering how high rent prices are, that tells me that a lot of people are terrified of exactly the above and are staying out of the real estate market for now.


He lives in a fairly populated blue collar town with lots of young people and he charges a reasonable price for rent.



blin10 said:


> _"I only buy one ounce gold and silver coins and bars. Why would I sell and take a loss? The values of gold and silver are only going to go up, as it has for the past 100 years. There's only so much left in the ground (in fact the worlds silver supply could be exhausted by 2030) so it would be stupid to sell it. Why I like it so much is because I can hold it in my hands. A company can go bankrupt and I could loose my investment but my precious metal is insured. For my investment strategy its a perfect long term investment."_
> 
> mistake #1, buying physical gold/silver when you have a ton of debt
> mistake #2, instead of buying gold company that you think can go bankrupt you can buy GLD ETF.... when you hold physical metal when you want to cash out you need to sell it to someone (and it won't be at market price that's for sure)


All the gold and silver I've bought I bought when I had zero debt or just my truck payment. The dealer I buy and sell my gold from/to buys precious metal at market price, he just sells it slightly above market price.



blin10 said:


> _"I have three friends who are in the rental property game. One of them is my age and he had two houses, the second is 24 and he has a duplex and two houses and the third is 29 and he has 9 rental properties including a couple of duplexes, a triplex, a couple of houses and a 6 unit apartment building. "_
> 
> I know how teenagers talk, like the saying goes "never believe what they say and only believe half of what you see"... I have few buddies like that, talk mad game how their business so successful but in reality it's all BS, and the funny part is they still talking sh!t


Maybe they are, but I do a lot of electrical work in their properties and I've seen every unit they claim they have and they were all full. (There has been a few times I went into a unit and it's been vacant, but with a couple of weeks they are full again).


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## jcgd (Oct 30, 2011)

You really have $25K worth of tools? I only ask because I am a journeyman electrician and I could probably replace my hand tools for $1200 or less. I also have more than I need, as a fair chunk of the tools are convenience tools that I accumulated over the years. Add in a few quality drills, auger bits, ladders and such and I could probably get up to $5000. Add in a few job boxes and I might get to $7000. Just curious what you spent $25000 on?

Mutual funds are collections of stocks and bonds. If you no nothing about the stock market, you also know nothing about mutual funds.

You can't invest in RRSPs. You can invest inside of an RRSP, but you can't buy and sell RRSP accounts. Only the stuff inside the RRSP can be bought and sold. So it is illogical to buy a mutual fund outside an RRSP and pay tax on the gains when you could put the same mutual fund inside the RRSP and have tax free gains. 

A TFSA is similar to an RRSP. You should probably maximise your TFSA first (because of your lower income), RRSP second, and non-registered accounts last.

Sure, gold prices rise over long periods of time, with inflation. But not necessarily over a shorter time frame such as 10, 20 or 40 years. 

I see nothing wrong with being a real estate investor, as long as you due your due diligence like you would with any other investment. Real estate can be a lot of work with the managing end. The maintenance will likely be a little easier for you as you are a tradesman and probably have a knack for fixing/ installing things.


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## jordan_paul (Jul 1, 2013)

jcgd said:


> You really have $25K worth of tools? I only ask because I am a journeyman electrician and I could probably replace my hand tools for $1200 or less. I also have more than I need, as a fair chunk of the tools are convenience tools that I accumulated over the years. Add in a few quality drills, auger bits, ladders and such and I could probably get up to $5000. Add in a few job boxes and I might get to $7000. Just curious what you spent $25000 on?
> 
> Mutual funds are collections of stocks and bonds. If you no nothing about the stock market, you also know nothing about mutual funds.
> 
> ...


It sounds alot for an electrician but I still don't know if I want to stay with a company or strike it out on my own after I'm licensed for a few years so I buy tools with money I make from side jobs. My bigger ticket items are a Bostch rotary demolition drill, Hilti sds drill, nine m18 and seven m12 Milwaukee tools tools, a greenlee hydraulic knockout set up to 4", greenlee hole saw and speed saw kit, all benders up to 1 1/4", 7500 watt generator, air compressor, ridgid power pony and dies up to 2", fluke 1587 meggar, fluke 117 multimeter and 322 clamp meter, ive got a 24' extension ladder, two 6' step ladders and 8' and 10' ladder. Let alone all my hand tools are Klein and Wera. 

I love working on diesel pickup trucks so Before I became an electrical apprentice I thought I wanted to be a diesel mechanic. I bought about $12 000 worth of mechanic tools from the time I was 14 until I was 17ish. It's still a hobby of mine to work on trucks so they get alot of use. I also dabble in wood working so I've got a table saw, mitre saw, scroll saw, nail/staple guns, drill press, planer, jointer etc. 

That's what I'm invested in gold for, the long term. And I'm sure there will be a few more bubbles in my lifetime so I will just watch the market and sell when the time is right. And I don't plan on jumping into real estate blind. I still have 3 more years to learn everything I can about that market. Me being able to work on these rental properties is a big ace up my sleeve that I'm sure alot of people on this forum don't have the skills to do. That alone is a pretty good edge and a huge way to cut overhead.


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## Dmoney (Apr 28, 2011)

jordan_paul said:


> Me being able to work on these rental properties is a big ace up my sleeve that I'm sure alot of people on this forum don't have the skills to do. That alone is a pretty good edge and a huge way to cut overhead.


Won't touch the rest of the thread, but this is very true. Have a cousin who is an electrician with a handful of rental properties, and the amount of money he's saved by doing absolutely everything himself is astounding. On the one hand, this is time that he could have been on other jobs making money, so there is an opportunity cost to his time, but on the other hand, if you can do it in your spare time, you'll save thousands over the long term.


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## CadMan (Apr 16, 2010)

jordan_paul said:


> Read my OP again, very slowly. Sound out the words. As far as I can recall I haven't asked for advice yet.


You might want to go back and read your posts and see how smug, arrogant and all-knowing you sound. There are lots of posters on this form with lots of knowledge and experience. Presumably the reason you are posting on a public forum is because you want input from others.


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## Compounding1 (May 13, 2012)

I'll stay clear of the other stuff and just reiterate the get out of mutual funds tip. Look up how much you're paying in management fees, I'm sure it's around 2%. Then look up e-series funds or even Questrade's ETF's because they trade free. It makes no sense to me for you to be thinking long term that much and have money sitting in mutual funds where you probably aren't even making money after fees and inflation. Change that and I think you'll be set to do great. GL


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## Feruk (Aug 15, 2012)

jordan_paul said:


> He lives in a fairly populated blue collar town with lots of young people and he charges a reasonable price for rent.


This was the least important detail of my long reply. All I'm saying is the short-term past is often a poor indicator of the future. You should do a fair bit of research and understand the market you're looking to jump into or you could stand to lose a lot of money in a country where you cannot walk away from a mortgage.



jordan_paul said:


> The Bank of Canada has stated they will never let the 20% mortgages happen again. They also stated they could only raise prime a quarter point per yearly quarter. I'm still not worried about it.


You realize that a move of interest rates of 1% can devalue your investment by ~8.75% right?


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