# investing advice for young couple



## getliquid (Mar 2, 2014)

can anyone make any suggestions on our current situation?

married both early 30's with 2 toddlers, I'm with the public sector and pretty much going to stay there for awhile, my other half is finishing her parental leave and most likely will start a small business/franchaise

no loans of any sort or cc balances

mortgage
primary residence value 500K mortgage 300K
rental property value $400K mortgage $248K

After pension contributions I max it out by contributing into my wifes name due to my pension

TFSA maxed out for both of us currently in high growth CIBC funds, we put them in two years ago into US growth fund, CDN growth fund, CDN dividend fund, it has averaged 20%++ past year. I know about the high MERs and being researching MW104, 106 and TD e series. I read somewhere the MW104 have been averaing 8% in the past 10 yrs and 106 have been averaging 16% in the past 5 yrs? I know either CIBC or MW funds arent backed by the government, but what are the chances of the MW funds disappearing overnight vs the CIBC or TD E-series?

we have about $100K sitting in cash we want to invest, we wont need it anytime soon so we are debating on another rental property or should we invest more into the e-series/MW/mutual funds? Is couch potato the best way to diversify to different fields? 

our mortgages are coming up for renewal next summer so we might setup a HELOC and do the smith maneuver and take more money out to invest.


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## hboy43 (May 10, 2009)

Hi:

Trying to piece together the numbers it looks like you have a net worth of $500K and $900K in RE with $548K in mortgages. I think the diversification principle argues against another property. That leaves either stocks or paying down the loans. As your wife is intending to start a small business, more risk, I would tend to advise a pay down of the loans.

hboy43


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## Just a Guy (Mar 27, 2012)

Since you don't give any numbers on the returns you are generating, it's impossible to see where you are being successful...

Owning stuff isn't the same as being good at investing. For example, if your $400k rental property is only making you $1000/month, I'd say stay away from owning more rentals...if you are making $4000/month from the rental, I'd say you know what you are doing and should buy more.


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## Four Pillars (Apr 5, 2009)

getliquid said:


> no loans of any sort or cc balances
> 
> mortgage
> primary residence value 500K mortgage 300K
> rental property value $400K mortgage $248K


Are you absolutely sure you have no loans of any sort?


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## getliquid (Mar 2, 2014)

Four Pillars said:


> Are you absolutely sure you have no loans of any sort?


well I meant I don't have any "bad" high interest loans....


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## getliquid (Mar 2, 2014)

Just a Guy said:


> Since you don't give any numbers on the returns you are generating, it's impossible to see where you are being successful...
> 
> Owning stuff isn't the same as being good at investing. For example, if your $400k rental property is only making you $1000/month, I'd say stay away from owning more rentals...if you are making $4000/month from the rental, I'd say you know what you are doing and should buy more.


the rental is getting $1650/month 30 yr mortgage (26 left 248K outstanding P-.75 var) 

1650
$80 management fee
$300 property tax
$950 mortgage

so that leaves positive flow of $220

the house was bought brand new, so there should be no major repairs in the near future.

Instead of buying another property I might get in on joint ventures, but still that might be leaving us too heavy in the RE category.

Right now for the $100K we got I'm debating on either MW 104 or TD e series.


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## Just a Guy (Mar 27, 2012)

If you're making 20% on your other investments, and since your "profits" will disappear if the interest rates increase by 1% over the next 26 years. If you have more than 1 month of vacancy, or are forced to evict someone due to non-payment, then your profits will disappear for the year as well.

If you want to factor in any maintenance, repairs due to a bad tenant, etc. you are not doing well either...have you factored in the money for a return including your down payment?

I'd say your real estate portfolio is doing quite poorly. I'd say you should stay away from real estate...in fact, you should sell your rental and keep out of being a landlord completely.


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## marina628 (Dec 14, 2010)

I get $1400 on a 200k house that rental is not a good investment to keep.Also you have two small kids are you doing RESP for them?


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## getliquid (Mar 2, 2014)

marina628 said:


> I get $1400 on a 200k house that rental is not a good investment to keep.Also you have two small kids are you doing RESP for them?


RESP is contributed to the max for both of them every year

Yes the cash flow might not be the best but shouldnt equity growth be considered as well? I put 20% 66000 down in summer 2010, now the house should be able to sell for $400K so $64000 gain - $12000 capital gains = 52000. So 80% of the down payment return in less than 4 years. Assuming the $200/monthly cash flow is all being used in repairs and I break even in that part.

Had I put that $66000 down payment in a Mawer fund which averaged 10% in the past 5 years, I would only earned less than $25000 after tax. Also it brings into the fact that I would have been too heavy into one category, which I'm trying to spread out and leverage all our investments.


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## Just a Guy (Mar 27, 2012)

What happens if you get a correction which many people feel is more likely in the next 5 years?

Of course, you can ignore the recommendations of the professional real estate investors on this board...trust me, people like marina consider many more factors than you probably do.


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## Karlhungus (Oct 4, 2013)

Cash flow $220 per month is fine. I would not sell if you can handle being a landlord.


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## richard (Jun 20, 2013)

getliquid said:


> Had I put that $66000 down payment in a Mawer fund which averaged 10% in the past 5 years, I would only earned less than $25000 after tax. Also it brings into the fact that I would have been too heavy into one category, which I'm trying to spread out and leverage all our investments.


Compounding returns make a big difference given enough time. After 20 to 30 years it won't even be close. I'm not sure if the fund you use is a balanced fund or just a stock fund but in any case it's a lot more diversified than a single house.


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## OnlyMyOpinion (Sep 1, 2013)

*I put 20% 66000 down in summer 2010, now the house should be able to sell for $400K so $64000 gain - $12000 capital gains = 52000. Had I put that $66000 down payment in a Mawer fund which averaged 10% in the past 5 years, I would only earned less than $25000 after tax.*

You're comparing your leveraged down payment with an unleveraged MF purchase. Not saying its wrong, but not apples-apples (also not suggesting you should leverage the MAW104 by buying on margin).


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## fransiskawitanto (Aug 21, 2009)

getliquid said:


> the rental is getting $1650/month 30 yr mortgage (26 left 248K outstanding P-.75 var)
> 
> 1650
> $80 management fee
> ...


I recommend you to put the $100K in seg funds (MER is lower, death benefits, guaranteed amount, etc), with the following allocation : 30% US dividends fund or value balanced (ensure the underlying investments are invested in US large cap), 30% global (europe is right now at the rock bottom - meaning they couldnt go any lower, good time to get into their market), 30% monthly high income (with canadian company) which will perform as the defensive investment, 10% energy (which starts to picking up as well).


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