# Advice Needed - Investing when planning to purchase home



## vaninvestor (Jan 23, 2015)

Hi everyone,

I am not quite sure what to do with my money, wondering if anyone can give me some advice here? I am in my late 20s, and am thinking of purchasing a home with my partner in the next few years.
We live in Vancouver, and I was hoping to buy a detached home, but the longer we wait, the further we seem to be away from that goal.

I am a very conservative person, and have kept most of my savings in high rate savings accounts for most of my life.
Recently, I decided to put in a portion of my savings into RRSP and TFSAs to start my retirement savings.

Right now I have around $165K in savings. Here is the breakdown of where they are:

- $20K of my RRSP invested in TD e-series. I am planning to up that to around $30K over the next year.
- I have another $14K of RRSP sitting in a high rate investment savings account, earning 1%. 
- I've maxed out on my TFSA, but all $35K is sitting in a high rate investments saving account.
- $95K are in an unregistered high rate savings account earning 1.10%.

I know if I just let it sit like that, inflation will eat it up.
But I am worried that if I put money into the market, it might tank in the short term and I won't have the flexibility to take it back out for a home purchase a few years down the road.

For background, my partner has around $150K sitting in ETFs (lots of US and US REITs), and around another $175K in savings. He also owns a condo that has appreciated by at least $60K since he purchased it. Net equity (value of home less mortgage) is approx $200K.

Our combined annual income is around $150K after taxes. I tend to think that our jobs are quite stable, but you never know about these things I guess.
A detached home in Vancouver will probably cost us around $1M to $1.5M. We hope to contribute a healthy down payment when we do purchase.

Any suggestions on what to do in my situation? Any advice would be greatly appreciated!


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## vaninvestor (Jan 23, 2015)

Also, sorry if I posted in the wrong place, I just saw Money Diaries and I'm not sure if that's a better place for this post?
If that's the case could someone help me move it to that area, thanks. :smilet-digitalpoint


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## donald (Apr 18, 2011)

I don't have much advice but i think you might make some late 20's on lookers feel like crap lol jk!
You and your partner seem to be in very good shape,can't imagine you don't think that either.
Your partner is holding a lot of cash right now it seems
i do understand your dilemma though esp in van market!


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## banjopete (Feb 4, 2014)

http://canadianmoneyforum.com/showt...n-near-term-house-purchase-investing-strategy

Also I appreciate how scary much of this seems but with that much cash and near cash equivalents sitting around it seems like you've already made your mind up about which way to go.

Any prediction for future returns is just that, but over the last few years you've missed out on great market returns with what is mostly considered to be pretty safe and diversified strategies. I'm less a believer in real estate than the next guy and really can't understand why anyone in their 20's would want commit nearly $600k to purchasing a home in our current environment. Even laddered GIC's would be better than HISA's for all that cash especially if you're a few years from buying.

Also for a fresh look at real estate Garth Turner has a very enlightened blog that offers a bit of a counter argument to your local newspaper's real estate section and writes many pointed entries aimed at young strong earners and savers like yourselves.

There's a big world out there, that doesn't have to be all about real estate. You guys have done very well saving that much and that money can go a very long way to setting an amazing path for you guys in a few short years, or you could buy a house.


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## Westerncanada (Nov 11, 2013)

What do you do for work ? And where do you meet a partner with $150k of ETFs?


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## GreatLaker (Mar 23, 2014)

Wow, not many responses. 

Risk and return are linked, and if you want higher return you will end up taking more risk, which could manifest itself in delaying your ability to purchase your home. There are not any easy answers.

I look at getting into the housing market as having 3 phases:

1) Thinking about buying a house, but no defined plan or timeline. Just invest in a balanced portfolio.

2) Planning to buy a home, determining how much to spend, defining a timeline and putting a plan in place to get there. Invest in a conservative portfolio with laddered GICs maturing when you plan to buy, plus any excess in equities, recognizing that if the market goes way up you win and can buy earlier or bigger, but of the market goes down you may have to scale back a bit or defer your purchase somewhat.

3) Committed to buy, signing an agreement to buy, down payment, etc. At this point, take no risk at all with your payments, keep it all guaranteed like HISA or short term GICs.

You have a lot in HISAs giving you flexibility but low return. One suggestion is pick a timeline to buy, a couple of years in the future, and invest what is in HISAs in GICs or laddered GICs. You lose some timing flexibility, but can get higher rates. Check out higher rate GICs, look somewhere like ratesupermarket.ca for higher rates, but be mindful of CDIC limits, and credit unions are guaranteed by the applicable provincial guarantee, not CDIC. Probably not an issue, but if you go the credit union GIC route make sure you understand the guarantee vs. CDIC.

It looks like between you there is $565k, with $205k of that in equities, for a portfolio that is about 35% equities. Not a bad asset allocation for a conservative portfolio aimed at saving for a home. In a bear market it would not get hurt too bad. Main advice is if you can pick a time when you want to buy look at converting some of the cash in savings accounts to GICs, and ensure the equity component is broadly diversified, avoiding narrow sectors or risky strategies.

One good resource to understand investing is www.finiki.org, especially the part on portfolio design and construction, and risk and return.


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## Eclectic12 (Oct 20, 2010)

^^^^

Well there are a fair number of threads covering this topic ... which might factor in.


Depending on the time frame the money is needed and what the investments are ... there may be a risk of less money being available when the investments are cashed out.
A lot depends on what "a few years" means and how keen one is on buying.

Has the purchase costs and yearly costs (ex. property taxes, utilities) been considered?

The other question is whether the "savings" listed is available to purchase a house. For example, even where one qualifies - I believe the limit is $25K ... so if the RRSP holds $34K, any contributions being made won't be able to be accessed.


Cheers


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## vaninvestor (Jan 23, 2015)

Thanks Greatlaker and Eclectic, that makes a lot of sense. I talked to my partner and he agreed it's time to come up with a plan. I think the idea is to figure out when we want to buy (soon, he's asked that I start looking around), how much of our money we want to put as down payment, how much cash we are comfortable with having around as emergency, and then the rest would go into investments as retirement funds.

Still lots to figure out, but this is a start. Just started to look at listings today and it is just so ridiculous right now in Vancouver. $1M buys you tiny lots with rotting 1,200 sq ft homes. Maybe renting forever has its merits...


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## vaninvestor (Jan 23, 2015)

Westerncanada said:


> What do you do for work ? And where do you meet a partner with $150k of ETFs?


Accounting. In business school, when he didn't have $150k of ETFs but a kind heart, hardworking attitude and lots of potential.


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## vaninvestor (Jan 23, 2015)

Eclectic12 said:


> ^^^^
> 
> Well there are a fair number of threads covering this topic ... which might factor in.
> 
> ...


Yep. Those definitely needs to be considered. We discussed that around $20k cash should be retained as emergency cash or for living expenses at any given time, considering our annual income. Anything in RRSP we are going to treat as long term retirement I think, so I'm thinking of investing the rest in a slightly more aggressive balanced portfolio considering my time frame is over 30 years.


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## cougar (Oct 15, 2014)

I just saw something on the news last night about a company called Evolve selling tiny apts in Burnaby from 94,000 and up depending on size( 316 -1200 sq feet). Google them and have a look.


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## Butters (Apr 20, 2012)

you can use 25k of RRSP for homebuyers to buy your first home
Similarly your partner could use 25k as well (if he hasn't already used it on his condo)
This is basically a FREE cash advance you can pay back over the next 15 years.

You have already hit 25k, you probably shouldn't focus on RRSPs anymore

Just keep saving your money, and keep it secure!!!!!!

I like GreatLaker's post


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## janus10 (Nov 7, 2013)

I was struck by the difference in risk appetite between you and your partner. While both of you have done well to accumulate top percentile assets relative to your income, I do hope that your very conservative investing nature won't clash with your partners more aggressive risk profile as you embark on this new and exciting chapter in your lives. 

One thought - do you see a real possibility that you will want or need to move within 5 years? If so, you may not want the burden of having a home anchor you.


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## vaninvestor (Jan 23, 2015)

janus10 said:


> I was struck by the difference in risk appetite between you and your partner. While both of you have done well to accumulate top percentile assets relative to your income, I do hope that your very conservative investing nature won't clash with your partners more aggressive risk profile as you embark on this new and exciting chapter in your lives.
> 
> One thought - do you see a real possibility that you will want or need to move within 5 years? If so, you may not want the burden of having a home anchor you.


Yes, I have definitely realized the difference between our risk appetites. For now our finances are quite separated, and we do with our savings as we wish. But in the future it is my expectation that we would pool our savings together to start a family, which would require us to work together and also to buy a bigger place (living in a bachelor-sized condo right now). 

I have questioned him about the size of his investment portfolio. He said that he plans to have that amount in there as long term investment. 

I think we are in the same page in that both our investment portfolios only include long-term savings for our retirement funds, and we both still have a good portion of our savings in cash. 

We are at that age where it really is time to plan our future together... so definitely need to figure out the purchase/rent thing in the near future. Unfortunately the Vancouver market is ridiculous. $1M affords you a little run down shack on a tiny piece of land in East Vancouver, or a 30 year old house in Richmond...


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