# 18 years and counting



## Mukhang pera (Feb 26, 2016)

**


----------



## Davis (Nov 11, 2014)

For all of the forty years I've been reading newspapers there have been predictions of the end of the world, financial collapse, the Leafs winning the Stanley Cup, and none of these things has happened. I guess there's a first time for everything, but I wouldn't bet on it. I was told with utter certainty to buy gold in 2011 when it was $1400/ounce. It went up to $1800, and then down to $1200. I could have made or lost a lot of money.


----------



## Just a Guy (Mar 27, 2012)

How much money does she need? If you sell the place do you really need it to earn a lot more? You may be best to buy an insurance policy and an annuity ensuring she's got a steady income without any work or stress. If your wife is anything like mine, she has no interest in investing, managing rentals, or even an idea of where to sell gold. 

I'm not a big believer in gold, it doesn't technically appreciate in value, it's more of an inflation hedge. 

My guess is the best solution is to leave behind a steady income, and no debts with some extra spending money. That says annuity and insurance.


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## Just a Guy (Mar 27, 2012)

I think you misread what I suggested. I said sell the house and buy the annuity with the money. I'm not sure how much it would bring in, I'm no expert, but it's a steady income for life (I'd get one that's increases with inflation to ensure against hyperinflation). If you die early, it can be a waste of money, but then you won't need more anyway. If, on the other hand, you live a long time, it can be a great investment. My great aunt had one set up for her by her husband upon his death, and she lived a lot longer than anyone expected. He other good thing about an annuity is its steady income, which can't be wasted. It forces her to be fiscally responsible and not spend everything. People who win the lottery are usually broke in a few years because they don't understand how fast you can blow through it, an annuity can limit that to some extent. 

Then I said to also get insurance as well on top of the annuity. This is to cover all the debts, and to give her an "emergency fund" or spending cash over the monthly annuity cheques. At your age, it will be expensive, but again you're looking at a tax free guaranteed return. As for their paying out, just get one of the more reliable companies. As to how they made the money to build towers, back in the day, they used to invest the money in the stock market and benefitted from higher interest rates(which isn't as strong anymore, but there is still a spread)...during the boom years they made a killing. Of course, during the bust years (2007/8) they didn't do so well. Either way, they don't usually rely on the premiums to make their money for payouts, they get that from highly leveraged invesments.

Now, this may not be the best return on investment as I said before but, if interest rates rise, housing prices are going to tank...but insurance companies will do much better. I did a rough calculation a little while back and I figure Canadian real estate is about 42% overvalued today (that's based on the average selling price, you are still able to buy places that are above or below the average prices). While prices will eventually recover due to inflation, I doubt your wife will want to do he work required during that period which could be decades. She'd probably have to deal with lower rents, the property may go underwater...all your plans for a secure retirement for her gone because of the economy. 

At your age, I'd bet on the sure thing, even if it doesn't look great. This isn't an "investment" this is as close to "guaranteed protection" as you can set up, there is a price for that. You'll be leaving your wife debt free, with a steady income and an emergency fund. Eventually, she'll be forced to downsize because of age and health, so she'll sell the house. If she can't survive with that kind of plan, then that's her fault and, frankly,mi wouldn't have much sympathy.


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## My Own Advisor (Sep 24, 2012)

Davis said:


> For all of the forty years I've been reading newspapers there have been predictions of the end of the world... the Leafs winning the Stanley Cup....


LOL


----------



## Just a Guy (Mar 27, 2012)

I can understand the "home" mindset, that's why I never consider renting a place I've lived in. My rentals are a business, so I keep the emotions out of it.

As to the reasons why I continue, I suppose that has to do with a couple of factors. The first is my getting injured years ago. It lead me to being beyond dead broke, it left me a little insecure. I started out being debt free, got injured, and saw how fast things can change. I suppose that is always in the back of my mind. Even though I've got multiple streams of income, I'm truly diversified, and financially secure right now there is still a part of me that knows it can all change very quickly. 

Another reason is that I have 4 kids as well as my wife to think about, leaving behind enough to help 5 dependants is different than leaving behind enough for one. I've been bringing my kids up to understand what I do, if they choose not to persue it, that's fine, but they all know what's involved and can manage it after I'm gone.

Finally, I suppose I do it because I enjoy the game. Some people like playing games like monopoly, I enjoy playing it in real life. Being physically injured may prevent me from doing a lot of things, but investing is a mental exercise. I enjoy finding and negotiating, the doing things others say can't be done... I'm not so big on the managing (but I can hire people to do that part). 

Even with all the things set up, I still have insurance policies in place. I've set up the real estate to act as an annuity, but then I've got a lot of properties to do that with, it would be difficult with only a few.


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## Just a Guy (Mar 27, 2012)

You know, you can set up the annuity in US dollars. Since you'd be selling the house in US dollars, it wouldn't be hard to turn it around into an annuity. 

The other thing to consider is you can delay the start of the payout for the annuity. The later it begins, the higher the payout. 

I think you need to step back a bit and take a real critical look at your investment. To be realistic, the ROI isn't very good, for the same amount of investment, you could have a much bigger cash flow. If something happens to you current tenants, your easy money could become a nightmare. This isn't a simple investment. Of course, it's hasn't been a difficult investment, so you've grown complaisant...

Because I came from a little more dire beginning, and couldn't really afford to fail or grow complaisant, I always look at things with an eye to efficiency. There is another recent thread where someone wants to buy a 500k house which he expects $2500/month gross. For the same investment, I outlined how I'd be expecting $8k/month gross (for 750k, I'd be expecting $12k monthly return). Now, I admit I wouldn't have ocean front but, I also would never want to move into one of my rentals for emotional reasons. Besides, with the better cash flow, I could afford to buy my own ocean front property and have it paid for by my investments (as my cash flow is nearly $6k better than the other "investor"). 

Now personally, I think you should look at selling the property, but that doesn't mean you need to do it right away. You've got some time to do it. You are right to not trust a realtor, they are only interested in their commission. 

Instead of looking at the problems selling this will cause, look for solutions which may not only solve your concerns, but maybe actually give you a better solution. Cut the emotions out of the thinking and start coming up with what you need, it may require compromise but, in this case (with so much dead money) I expect you may actually kick yourself for not acting sooner. Let logic and math be your guide, it's better than emotion.


----------



## Berubeland (Sep 6, 2009)

I would say, you have the rental in So Cal, and it hedges the USD. I would look for a decent manager out there while you are still alive. 

Annuities are very expensive for a 25 year annuity that pays out $4000 per month, you will pay $948,577.08. At the end you will have 0 and it also only pays out for 25 years max. 

I don't know how to say this nicely, but it is never too late for financial literacy. You need to start teaching your wife now. I have seen what happens to wives that don't know what financial literacy is and... it isn't pretty at all. In fact it's really sad. They get taken advantage of and robbed. 

Real Estate has huge transactional costs. I would not recommend selling a property in the US which is probably reasonable priced to buy property here where it is over priced. Except of course Just a Guy's properties which seem to be the only cash flowing ones I've heard of in a long times. Except maybe trailer homes and student rentals.


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## Just a Guy (Mar 27, 2012)

Berubeland said:


> Annuities are very expensive for a 25 year annuity that pays out $4000 per month, you will pay $948,577.08. At the end you will have 0 and it also only pays out for 25 years max.


my great aunt had an annuity which lasted until her death, which was well over 25 years from when it started. I believe it was set up with a US company, but she lived in Canada. My great aunt outlived her husband, her sister (first power of attourney), my mother (second power of attourney) and I was worried when I got the job. I know for sure it paid out well over 30 years, and she wasn't expected to live very long. I also realize it's a lousy investment, but it ensures your wife can't "blow" the money or have it stolen. 

As for having nothing at the end well, having a pile of unspent money when you die doesn't do you a lot of good either. I'm sure you can still find lifetime annuities. There are many things people say don't exist, mainly because they are too lazy to look I've found...one of my kids is like that.

As for teaching your wife, I've found, from personal experience, that it's hard to be a good investor unless your investing style matches your personality. Even if your wife shows an interest, she may not jive with real estate. I know my wife hates dealing with tenants...but she understands how it produces income. If people don't like what they are doing, they tend not to give it the proper attention and wind up losing money or getting taken advantage of. 

Berubeland is right though, there aren't a lot of properties available in Canada right now, so even if you wanted to come north, you may not find anything worthwhile. I bought 5 properties two years ago, nothing last year, and three so far this year and I'm actively looking (think of the odds, 3 places out of the millions of homes across Canada, the odds may be better to buy lottery tickets). Just because you have the money doesn't mean there is something to buy. There are a lot of places for sale, but few will cash flow, especially long term.


----------



## humble_pie (Jun 7, 2009)

what an irresistible late 60s gentleman you are. For some reason, you make me think of canadian author Michael Ondaatje, i'm half-expecting you to start telling tales of living in shang'hai or vienna, or in splendour on a vast 19th century tea plantation in the Nilgiri hills.

re the california house, it's great you have such an excellent tenant & they are occupying the entire duplex. But a quirk to their 10-year tenancy jumps out & it looks like this: for such a large dwelling, they must have children? after 10 years those children must be growing up? when children grow up they leave home? then the parents downsize? you'd have to find new tenants? your luck might change?

as just a guy says, subsequent tenants could cause damage, you have been fortunate, trouble has never visited, but clearly the great spirit of all landlords has been watching over you & your california house these past 18 years.


----------



## Eclectic12 (Oct 20, 2010)

Mukhang pera said:


> ... You make a very valid and worthwhile point about "financial literacy". I should not despair that there is no hope there. My wife is bright, but just with a bad case of fiscal illiteracy.


My co-worker found that while he tried to start the discussion, it always hit a brick wall. When they went in together where she was making an RRSP contribution, the bank advisor started the same discussion he was trying to have about a spousal RRSP. 

Having someone else asking similar questions where he was able to summarize the details and the bank advisors were confirming the info was correct seemed to spark her interest to the point that she has now asked him to start teaching her.


Maybe finding a way to prime the pump or tie the financial knowledge back to an interest of hers will help. 

He also found that when she would be overwhelmed by the amount of info or frustrated by not understanding on the first try, his comment that her cooking took years to learn - it is more important to learn at your pace seemed to keep her from giving up (as so many do).

Best of luck ...


Cheers


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## Just a Guy (Mar 27, 2012)

You may want to look into a rent to own situation for your current tenant. There is certainly an upside to this for your situation. Plus it would set up an exit strategy for you. There is a pretty good free ebook out there which explains everything you need to do for stuff in Canada. I imagine there are similar ones for the USA.


----------



## Mukhang pera (Feb 26, 2016)

**


----------



## humble_pie (Jun 7, 2009)

oh good, the child is only one year old. Might even by joined by another little bébé any time soon. This means the growing-up-&-moving-out stage is postponed, 2 children plus parents could fit into 3 bedrooms quite nicely for at least a decade, especially if there is a fenced backyard for the children to play in.

the way i see it, your tenant would definitely like to own the house. Of course he doesn't have the cash & of course you want to be paid a good price. Since time is on your side, it seems to be a matter of gracefully working out all the details. After all, you were not really wanting to have to deal, long distance, with $15,000 in renovations plus a period of vacancy plus breaking in a pair of renovated boots with 2 brand-new tenants, were you?


----------

