So, How Much Money Do You Make?

Recently I came across of a great article by Azhar Laher, founder of Thornhill Wealth Formand, one of the most successful clubs, dedicated to education in building wealth. I thought it will be a good idea to share it with all of you, who is on the way to be rich :)

One of my pet peeves is people telling me how much money they earn and flaunting their wealth to strangers. I am not talking about the cars they drive or the size of their homes, but rather about revealing their income without any reason. Usually it is because they want to let me know how  successful and important they are. This does not impress me. In fact it is a  turn off. I am only interested in their character and what they are doing to help others succeed. 

A recurring theme in The Millionaire Next Door, is discretion about one's wealth. Don't be too flashy, live conservatively and have a modest home. However, it is also important to enjoy your money by indulging in things that make you happy.

Here are some reasons why people reveal their income:

Is it Generational? : Maybe it’s a generational thing, but those who enjoy talking about how much money they make are generally younger e.g. under 30.  Perhaps thanks to the internet, it’s more acceptable nowadays to blast over Twitter and Facebook that it’s your birthday or a picture of your latest car.  There have been several studies showing that Facebook is making people miserable because suddenly they have to compete with hundreds of “virtual Joneses” instead of a couple.

Lower self-esteem. The people who are most confident have no need to tell anybody how much they make. They don’t need to buy a fancy car to make themselves feel better. They don’t need to incessantly highlight they went to X school and have Y things because their work and success speaks for themselves. Perhaps they fell behind in life early on and need to pound their income drum to prove to the world they are somebody. How many of us have imagined returning to our high school reunion as great successes to prove our detractors wrong? By telling others how much more we make than the average or median, we feel better about ourselves.

The desire for adoration. Adoration and self-esteem are tightly related. Have you ever met someone who was in good shape and keeps telling others she needs to lose weight? The reason why she brings up her weight is so that her friends can tell her she doesn’t need to lose weight! Everybody wants to feel pretty, respected, admired, and adored. It’s just one of our many traits as humans.

Lack of perspective. There’s a lot of suffering out there, but it’s hard to know if you’ve never traveled around the country or around the world. It’s like Prince Siddhartha Gautama believing that the whole world lived in privilege like he did within the walls of his palace. At the age of 29, Siddhartha left his palace for the first time to meet his subjects despite his father’s efforts to hide him from the sick, aged and suffering. The outside world moved Siddhartha so much that he strove to overcome ageing, sickness, and death by shunning luxuries and living the life of an ascetic. Eventually, he discovered the “Middle Way” and after 49 days of meditation under a Bodhi Tree, tradition says Siddhartha finally achieved enlightenment.

New wealth. If you go from not having much money to suddenly making a lot of money, it’s hard not to get excited. An easy example is going from a poor student to making $100,000 a year as a first year analyst at an investment bank. Now imagine if you won the lottery. Although you probably should not tell everybody, you would be hard pressed not tell all your friends and relatives about your good fortune. You buy a new house you don’t need when you can’t even fill the one you have. Instead of figuring out a way to make your new found wealth work for you, you blow it on material things that provide only momentary reward. It’s immaturity with money that gets people in trouble.

In conclusion, unless your occupation is to teach people how to make money by showing them how much money you make, I advise caution when revealing income. It’s much better to keep things low key, downplay what you've got, and be the underdog to get ahead.

Toronto Market Watch: February 2013

GTA REALTORS® reported 5,759 sales through the TorontoMLS system in February 2013 – a decline of 15 per cent in comparison to February 2012.  It should be noted that 2012 was a leap year with one extra day in February.  A 28 day year-over-year sales comparison resulted in a lesser decline of 10.5 per cent.

The average selling price for February 2013 was $510,580 – up two per cent in comparison to February 2012.

“The share of sales and dollar volume accounted for by luxury detached homes in the City of Toronto was lower this February compared to last.  This contributed to a more modest pace of overall average price growth for the GTA as a whole,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“Stricter mortgage lending guidelines that precluded government backed mortgages on homes sold for over one million dollars and the City of Toronto’s additional upfront land transfer tax arguably played a role in the slower pace of luxury detached home sales,” added Ms. Hannah.

The MLS® HPI Composite Benchmark price covering all major home types eliminates fluctuations in price growth due to changes in sales mix.  The Composite Benchmark price was up by more than three per cent on a year-over-year basis in February.

“We will undoubtedly experience some volatility in price growth for some market segments in 2013.  However, months of inventory in the low-rise market segment will remain low, resulting in average price growth above three per cent for the TREB market area this year.  Our current average price forecast is $515,000 for all home types combined in 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Summary of TorontoMLS Sales and Average Price – FEBRUARY 2013
	2013							2012
	Sales		Average Price			New Listings		Sales	Average Price			New Listings
City of Toronto ("416")	2,189		$552,014			4,326		2,617	$552,684			5,125
Rest of GTA ("905")	3,570		$485,174			6,726		4,192	$467,514			7,467
GTA	5,759		$510,580			11,052		6,809	$500,249			12,592
TorontoMLS Sales & Average Price  By Home Type – FEBRUARY 2013
		Sales					Average Price
		416		905	Total		416			905	Total
Detached		749		2,025	2,774		823,329			582,777	647,728
Yr./Yr. % Change		-16.9%		-15.8%	-16.1%		0.1%			3.4%	2.2%
Semi-Detached		234		382	616		618,777			401,981	484,335
Yr./Yr. % Change		-13.3%		-15.9%	-14.9%		6.2%			4.4%	5.6%
Townhouse		230		682	912		450,440			371,640	391,513
Yr./Yr. % Change		-0.4%		-5.9%	-4.6%		4.9%			7.1%	6.7%
Condo Apartment		953		399	1,352		352,614			281,398	331,597
Yr./Yr. % Change		-20.0%		-20.7%	-20.2%		-4.7%			4.3%	-2.5%

Toronto overtakes Chicago as fourth-largest city in North America

Toronto has leap-frogged Chicago to become the fourth-largest city in North America, according to a new report that came before the economic development committee Tuesday.

The latest data from Statistics Canada and the U.S. Census Bureau show Toronto’s population at an estimated 2,791,140, narrowly edging out Chicago, which sits at an estimated 2,707,120. The top three spots go to Mexico City, New York and Los Angeles.

“These population figures are another sign confirming Toronto’s steady growth,” Mayor Rob Ford said in a statement. “Toronto is a desirable location for people to live and work. We are attracting people from across North America and other parts of the world.”

The Economic Dashboard report relied on Statistics Canada’s July 2012 population estimates, released last month, which also revised the city’s 2011 population estimate to add 9,400 people. The latest available U.S. Census Bureau data for Chicago was from 2011.

The population figures refer to the cities proper, rather than their metropolitan areas. When the latter is taken into account, Chicago outstrips Toronto by several million people.

Toronto’s annual population growth rate has risen steadily over the last decade, and the city’s numbers are now increasing by about 38,000 people annually. But while that is overall a positive thing, said Pierre Desrochers, associate professor of economic development at the University of Toronto’s Mississauga campus, the city must seriously consider a host of related problems, from transit to increased housing costs.

“Historically, whether we’re fourth or seventh doesn’t really matter,” Mr. Desrochers said. “What really matters for the future of the GTA is whether we can address the problems that come with that growth.”

He pointed to another list that Toronto tops: that of worst average commute times in North America. Such issues will play a key role in whether Toronto remains an attractive city for newcomers in the years ahead, Mr. Desrochers noted.

Here is what the Economic Dashboard had to say about other elements of the city’s economy:

Population Estimates: Toronto’s population has been increasing over the past 10 years and has yet to stabilize or decrease.

The annual rate of increase is 38,000 people. Although immigration to the city of Toronto has declined, intra-provincial moves and a natural increase in births and deaths are the factors that contribute to the steady upward climb. The population in Toronto has caused a ripple effect in other areas of the economy.

Housing: According to the Economic Dashboard, Toronto real estate is stable and expected to moderate in the years to come.

The Toronto Real Estate board reported a 9% decrease in house sales but a 7% increase in the average price. The report suggests that changes to mortgage insurance rules in July 2012 contributed to the drop in the resale market.

Building: Toronto ranks first in North America, with 184 buildings under construction. The total value of building permits in 2012 — $6.2-billion — was three times higher than it was 10 years ago, but that number is still lower than 2010 and 2011. The number of issued industrial, commercial and instructional permits have decreased since 2011, yet the value of commercial permits have remained unchanged.

Office Market: Toronto’s office market is in the midst of a location tug of war. In the suburbs and cities outside of Toronto, vacancy in office space is rising. The office vacancy rate in the 905 area is now over 10%, the report says, compared to a rate of 4.4% downtown.

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Bank of Canada Announcement

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and, as promised, here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.

At 10:00 am EST, Wednesday March 6^th, 2013, the Bank of Canada again did what we expected them to do… they continued to maintain their overnight rate.    What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%.  This of course is fabulous news but as always, I like to remind you to make the most of the low payments you still have as the rate will increase in the future.  If you haven’t done so already, chat with a financial advisor about a Tax Free Savings Account or Retirement Savings Plan as your payments continue to remain low?  Especially if you have started your 2012 tax returns and you think you will get a refund or credit back, it might be a good time for us to chat about whether to pay down your mortgage to get closer to that Mortgage Burning Party date or invest the funds elsewhere.  If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.

Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision:

“Global financial conditions remain stimulative, despite recent volatility. In the US, the economic expansion is continuing at a gradual pace and private sector demand is gaining momentum. The recession in Europe continues and growth in China has improved.  Canada’s economy grew by 0.6 per cent at annual rates in the fourth quarter of 2012.  The Bank expects growth in Canada to pick up through 2013, supported by modest growth in household spending combined with a recovery in exports and solid business investment.  Weaker core inflation and lower mortgage interest costs, were only partially offset by higher gasoline prices.  Low core inflation reflects muted price pressures across a wide range of goods and services, consistent with material excess capacity in the economy”

Based on this news and the continued slack in the Canadian economy and the muted outlook for inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur possibly as late as Fall 2013 to early 2014!   Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.

Fixed rates haven’t changed at all since the last announcement, at around 2.99% to 3.19% for a five year fixed term.

Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now.  However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is April 17th, 2013 at which time I’ll be in touch again.

I wonder if I can ask a favour – rates are still so low right now and the Spring market will be soon upon us and it is a great time for first time home buyers to start considering their options.  It is a perfect time to work with me to not only hold rates for up to four months while they go house hunting but also work on their action plan to make dreams of homeownership a reality!  If you know of someone that is looking for advice on their mortgage options, with no obligation, would you mind passing my contact information on to them – this is very much appreciated.

How to Invest RRSPs in Real Estate

February is traditionally RRSP season and while you are rushing to contribute and reduce your taxes, we wanted to talk how to invest these money into real estate.

There are two main ways you can invest your RRSP in real estate. First one is non-arm’s length, i.e. hold a mortgage on your own property.  In order to do that you have to hold the entire mortgage, which means that you need to have a significant amount in your RRSP (typically over $200 000). Also you have to pay yourself interest and it has to be comparable to what is paid on the market. Typically 2% would be a minimum you can pay.

Second way is more attractive for investors – arm’s length projects. This means that person who owns real estate (or corporation that is buying a property) can’t be related to you. You can hold first, second or any other consecutive mortgage for any amount and any period of time. As you can see, there is no need to have large amounts in RRSP, but it makes more financial sense if you invest over $20 000 for over a year. This is mainly because of the bank and lawyer’s fees that will be involved.

So what do you need to hold a mortgage from RRSP? First of all you will need to open a self-directed RRSP account and pay about $150 account set up fee.  Then you  transfer your funds there. Note that the transfer takes 4-8 weeks, so you need to start ahead of time. You will have to pay a monthly fee on self-directed account, which can be as little as $10. Make sure you have following documents:

·         Copy of Mortgage you are taking (the mortgage must include interest rate, maturity date and payment amount with a minimum of one payment annually). Most of the banks that administrate self-directed accounts will accept up to 100% loan to value financing.

·         Valuation of Property (Tax assessment for the current year or Purchase/Sale Agreement if the property was sold within the last year and the transaction was arms-length or appraisal dated within the last six months)

·         Information Statement as to amount outstanding on prior encumbrances

·         Current copy of title

·          Any existing mortgages that are being funded or transferred to the registered plan must be current

You bank might request additional documents. Once you have all that submit it to the bank and your lawyer. Bank will then transfer that funds to lawyer’s trust and then it will get distributed. Note that typically you will have to pay mortgage set up fee of about $100.

As to the interest you receive, ask for postdated checks or request automatic deposit to be set up. Your bank might charge for checks deposits (something like $2). At the end of the deal you will have to pay mortgage discharge fee to the bank ($25) as well as lawyer’s fee.

Hope this shades some light on the confusing investments with RRSPs

Happy Valentines Day!!!

Valentine's Day isn't just about 
couples and romance. 
It's also about friends and sharing 
and letting people know you care about them and 
how important they are in your life.

Women are from Venus, Men are from Mars


Make no mistake, men and women tend to view mortgages very differently.
Men are looking to buy a house, but for women getting a mortgage represents empowerment and safety. For this reason, men are more prone to close a deal much faster than women are. Women want to take more time to weigh all the pros and cons, typically the process takes a year. Men are typically very rate focused, don’t pay much attention to other details such know what their options are especially in case they miss payments. 

Toronto Market Watch: January 2013

Greater Toronto Area REALTORS® reported 4,375 transactions through the TorontoMLS system in January 2013. This number represented a slight decline compared to 4,432 transactions reported in January 2012.

“The January sales figures represent a good start to 2013. While the number of transactions was down slightly compared to last year, the rate of decline was much less than what was experienced in the second half of 2012. This suggests that some buyers, who put their decision to purchase on hold last year due to stricter mortgage lending guidelines, are once again becoming active in the market,” said Toronto Real Estate Board (TREB) President Ann Hannah.

“It is interesting to note that sales were up for many home types in the GTA regions surrounding the City of Toronto. This is due, at least in part, to the additional upfront land transfer tax in the City of Toronto,” added Ms. Hannah.

The average selling price for January 2013 sales was $482,648 – up by 4.3% compared to $462,655 in January 2012. The MLS® Home Price Index (HPI) Composite Benchmark price was up by 3.8 per cent over the same period.

“There will be enough competition between buyers in the marketplace to prompt continued growth in home prices in 2013. Expect annual average price growth in the three to five per cent range this year,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Condo market continues to be down in both sales ( - 5.1%) and price ( - 1.2%). All other property types discovered price increase, though number of sales of townhouses in Toronto experienced the larges drop in number of sales ( - 11.2%) which might be due to the fact that price is now over $400K

Number of active listings continues to stay higher that a year ago and days on the market are 5 days more now than in 2012

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