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Old 05-06-2011, 03:03 PM   #1
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real estate or mutual funds

In 2005, say you had 500k east van house but sold it too early and put the money into a lower risk mutual fund instead at 5-7% return-- what difference would the margin had been if you kept you house until now instead of selling it?

Would it have been about the same without keeping the house as a riskier investment?
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Old 05-06-2011, 04:49 PM   #2
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WTF are you asking? English much?
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Old 05-06-2011, 05:12 PM   #3
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WTF are you asking? English much?
What is his annual rate of return had he invested in 500k instead.
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Old 05-06-2011, 05:18 PM   #4
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your ROI would of been between -100000% to +100000%.

What a dumb fucking question.
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Old 05-06-2011, 06:55 PM   #5
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I'd say you do research.

The area of where your house sold can vary the price, plus things like taxes/mtg/utilities need to be included into the equation as well as MER for the MF.

that said...RFLUSH pretty bang on.
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Old 05-25-2011, 01:52 PM   #6
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I think what he basically wants to know is which one would be a better investment.
I would say right now Real estate is a pretty hot market right now and is a great short term or long term investment. Real Estate has so many opportunities for income streams from a single property. And pairing it up with life insurance can basically double the value.

Example. You purchase a 500K home that has 2 rental units that you can rent out for $800-1000 per unit. You paid for the home already so the cash value of the home is roughly 500K you then go to a bank to get a Home Equity Line of Credit and buy yourself a pre-paid Universal Life insurance plan so you don't have any extra monthly dues. Now take your life insurance policy to the bank and leverage it for another line of credit. for 80% of the value of the insurance policy.

So now you turned your $500K into
$500K house that earns $1600-2000/mo from renters which you can use to service the interest on Home Equity line of Credit and the Line Of Credit leveraged against the insurance policy
$500K full paid Universal Life insurance policy that is growing in interest on a yearly basis
$400K line of credit which you can then use to do it all over again until your last line of credit is no longer high enough to purchase a home.

So thats $500K turned into a compounding investment worth $1mil with a tax free $400k line of credit that you can use to do it again.

Cascade it down and you'll theoretically (depends on how much line of credit you will get from leveraging out the insurance policy)
$400K -> $800K
300K -> 600K
200K -> 400K

so on and so fourth.

you can read about this in the book " The 15 things that revenue Canada doesn't want you to know " or the 10 things that revenue canada doesn't want you to know. The 15 being the newest edition of the two books.
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Old 05-30-2011, 04:43 PM   #7
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Originally Posted by Nismo200SX View Post
I think what he basically wants to know is which one would be a better investment.
I would say right now Real estate is a pretty hot market right now and is a great short term or long term investment. Real Estate has so many opportunities for income streams from a single property. And pairing it up with life insurance can basically double the value.

Example. You purchase a 500K home that has 2 rental units that you can rent out for $800-1000 per unit. You paid for the home already so the cash value of the home is roughly 500K you then go to a bank to get a Home Equity Line of Credit and buy yourself a pre-paid Universal Life insurance plan so you don't have any extra monthly dues. Now take your life insurance policy to the bank and leverage it for another line of credit. for 80% of the value of the insurance policy.

So now you turned your $500K into
$500K house that earns $1600-2000/mo from renters which you can use to service the interest on Home Equity line of Credit and the Line Of Credit leveraged against the insurance policy
$500K full paid Universal Life insurance policy that is growing in interest on a yearly basis
$400K line of credit which you can then use to do it all over again until your last line of credit is no longer high enough to purchase a home.

So thats $500K turned into a compounding investment worth $1mil with a tax free $400k line of credit that you can use to do it again.

Cascade it down and you'll theoretically (depends on how much line of credit you will get from leveraging out the insurance policy)
$400K -> $800K
300K -> 600K
200K -> 400K

so on and so fourth.

you can read about this in the book " The 15 things that revenue Canada doesn't want you to know " or the 10 things that revenue canada doesn't want you to know. The 15 being the newest edition of the two books.
or the flipside of what you've said above is rental income of $1600 to $2000 which is not enough to cover your costs on the $500K mortgage (or $400K less the opportunity cost of your money) - you would have to have a mortgage rate of 4.8% or better to cover the cost alone on $500K, or said differently, you'd be giving your $500K an opportunity cost of 4.8% (at best) - but that's actually not true as you're not covering any mortgage principal payments, property tax (Which will be a lot on a $500K property) repairs, maintenance, etc.

above and beyond the other items you've mentioned, you've also opened yourself up to a significant amount of risk of things such as property values decreasing (don't be blind to this risk, 'vancouver is different' is annoying - fundamentals always win out, and you cannot say asian inevstment will be there forever, vancouver ain't that great)

if someone came to me suggesting this as an investment opportunity, i'd laugh at them, there are so many different & better options out there with better cash flows, less downside potential, and investments that adhere to fundamental economics - and these are in real estate, not the stock market (which i think anyone under 60 should be exposed to, to a degree)

also, leveraging, and leveraging, and so on, underpinned by a house is STUPID and if anything from recent times should teach us is that 'schemes' like these are EXTREMELY risky... unless you know your bankruptcy laws and are in a position to walk away if shit turns sour
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Old 05-30-2011, 05:09 PM   #8
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Being a landlord can be a PITA.
Renters can skip rent, damage your property, etc.
As well, there is a chance that your rental property will be vacant for several months.

Lastly, RE is not as liquid as stocks/mutual funds.
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Old 05-30-2011, 08:26 PM   #9
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Being a landlord can be a PITA.
Renters can skip rent, damage your property, etc.
As well, there is a chance that your rental property will be vacant for several months.

Lastly, RE is not as liquid as stocks/mutual funds.
BC laws are COMPLETELY tenant biased.

the ONLY places I will own property is places like Arizona where the laws are landlord biased. If you've not paid within 11 days of month's beginning, you WILL be out by month end, and given deposits are 1 month's rents, you're risks of being unoccupied are very low.

correct me if i'm wrong, but aren't squatter's rights something like 3 months with no payment before any law enforcement can make you leave? ridiculous
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