November

Today, as I was riding a Winnipeg Transit bus from Unicity to Downtown I did not realize that I would be a witness to something amazing.

The ride was, as usual, long and uneventful, until we reached the corner of Portage and Main.  That’s when the driver pulled over. This of course surprised all of the passengers on the bus.  But, what happened next still brings tears to my eyes.

The bus driver jumped off the bus to chat with a man that looked to be down on his luck; by all accounts, a homeless man. I first thought the driver was going to offer the man a ride until our driver took off his own shoes and gave them to the man on the sidewalk.

That is when I realized that the man the driver was chatting with was barefoot.  The bus was dead silent.  I think we were all stunned and speechless.  As we proceeded to our next stop, one of the passengers got up and said to the driver, that was the most amazing thing she had ever seen; and then she asked him, why did he do that?

The bus driver answered because he couldn’t stand the thought of that poor man walking without shoes.   Wow!  No judgement; it was just, “Here buddy you need these more than I do.”

There wasn’t a dry eye on the bus. All the passengers were moved by this bold and selfless gesture.

Now, a homeless man will have shoes for his feet because of a bus driver’s random act of kindness.

Not bad for a Tuesday morning in downtown Winnipeg.

http://www.communitynewscommons.org/our-city/winnipeg-transit-drivers-amazing-act-of-kindness-stuns-passengers/

November

Then they need to keep saving for their next home.

“If a fixer-upper rental home sells for $100,000 in seven years, they should have more than enough for the 20 per cent down payment to secure financing for the rental,” she says.

Yet even if their plan unfolds successfully, what Sylvester shouldn’t do is stop RRSP contributions. He might even want to start a spousal RRSP for Linda until she has full-time work to allow her to contribute to her own RRSP.

Chatain-White says an RRSP is more than a fallback plan. It makes tax sense, too. They get the benefit of tax-deferred growth over time, and they will also be eligible for tax credits when they retire.

“It’s advantageous to have RRSPs when they retire to ensure that they can access all the pension credits,” she says. “If they don’t have a work pension or an RRSP that converts into a RRIF (registered retirement income fund), they cannot receive this credit, so they would be leaving money on the table.”

Sylvester and Linda should also hire an accountant at some point. It’s not that they will need help with retirement tax planning — they will need tax advice to manage multiple income properties.

“Good tax advice ensures they claim all allowable credits, because their tax situation could get quite complicated depending how many rental properties they really acquire over time.”

Still, Sylvester and Linda have a few years before they’ll need an accountant. They’re looking at about six years before they will have enough money to buy their first rental property, and it’s likely a decade before they’ll be able to buy their second.

And there’s no telling what lending rules will be like at that juncture, Chatain-White says.

“In theory, if their residence is free and clear and their rental property has equity, they will likely be able to obtain a line of credit to acquire more properties if the rules are much the same.”

One note of caution, she adds.

“While real estate is a good asset, in tough economic times, it may not be quite so easy to find a buyer when they want to sell,” she says.

“Historically, though, Manitoba has had stable real estate markets, so that may not be a very big risk.”

Chatain-White says Sylvester and Linda are likely the biggest risk to achieving their goal because success hinges on their ability to pay down debt and save religiously. That’s a formula that can be very difficult to put into practice.

giganticsmile@gmail.com

Sylvester’s and Linda’s finances

INCOME

Sylvester: $50,000 ($3,180 a month)

Linda: $22,000 ($1,412 a month)

EXPENSES

Monthly: $3,974

DEBTS

Sylvester’s consumer proposal: $11,500; $610 a month payments

Mortgage: $58,000 owing at 2.5 per cent

Linda’s student loan: $6,500 at 6.5 per cent

Linda’s Visa: $3,500 at 20 per cent

ASSETS

House: $100,000 (estimated)

Sylvester RRSP: $2,100 in growth dividend mutual fund

Savings: $1,470

NET WORTH: $24,070

http://www.winnipegfreepress.com/business/finance/homes-sweet-homes-170807586.html

November 1st, 2012

Sylvester and Linda want to make like “The Donald,” but they don’t fancy sporting outlandish comb-overs, nor do they long to say “You’re fired.”

They do, however, hope to emulate Donald Trump’s success as a real estate tycoon, only on a much smaller scale.

“We’d like to start buying rental properties — maybe owning about 20 someday,” says Sylvester, a carpenter in his mid-30s.

“It’s kind of my line of work so I know we could maintain them with little cost.”

Linda, in her late 20s, also has work experience with rental properties. She is employed part time with a non-profit housing corporation.

She’s also in school part time and expects to more than double her salary of about $22,000 a year when she graduates.

The couple owns a home with a mortgage of about $58,000. Sylvester estimates the home is worth about $100,000. They purchased it for $62,000 two years ago, and he says they have put at least $30,000 worth of work into it.

Linda’s parents had to co-sign the mortgage because Sylvester, who earns about $50,000 annually, has no credit. A few years ago, he ran into debt trouble and entered into a consumer proposal with creditors. He still owes about $11,500, which he says will be paid off in 13 months.

With that behind him, they hope to bear down on other debts.

“We are looking to be debt-free in five years,” he says, adding that includes the mortgage and about $10,000 of student loans for Linda.

Afterward, they will save up for a down payment to buy another home, then another and another.

“We like the idea of buying a property every one to two years,” he says. “The idea is to buy and rent homes for about 20 years, and then we can just start cashing them in every few years in retirement.”

Of course, they’re not without a fallback plan. Sylvester recently started contributing to an RRSP. Still, he’s confident real estate is the key to their retirement.

“I’ve worked in property management most of my adult life, so I don’t see it being a problem.”

Then again, a little bit of expert feedback can’t hurt, he says.

Certified financial planner Valerie Chatain-White says investing in real estate for rental income is a tough road. Most people tend to focus on the upside of real estate, often overlooking the endless work involved: delinquent tenants, leaky roofs and calls in the middle of the night about the furnace conking out.

It’s a lot of headaches, especially when it’s a second job.

Yet, Sylvester and Linda appear to have the right skill sets for success.

“It’s always a big benefit when real estate entrepreneurs understand and possess the skills to undertake home renovations,” says Chatain-White, with the Next 30 Years. “There is no question that being able to handle renos and regular maintenance ultimately yields more money in a rental owner’s pocket.”

Their main obstacle, however, is Sylvester’s credit history. A consumer proposal isn’t quite the same as bankruptcy, but it makes getting credit difficult for a long time, generally affecting an individual’s credit rating for about three years after it’s been paid in full.

With that in mind, repaying Sylvester’s consumer proposal as quickly as possible should be a priority so he can rebuild his credit rating by the time they’ve paid off their home.

This should be a task they can accomplish fairly easily. Chatain-White says they have a $618 monthly surplus, which they should set aside in a high-interest tax-free savings account (TFSA).

“If they could save even $500 a month, that’s $6,000 in one year, plus a little bit of interest,” she says.

This sum will also provide them with an emergency cushion — something they don’t have.

“If they are successful in saving that sum for one year, they can then apply it to the consumer proposal and get it paid off faster.”

They should continue saving the surplus afterward — and they can also save the $860 presently going toward the consumer proposal.

All told, they could be saving $1,400 a month in as little as a year. That’s $16,800 a year, plus $372 in interest earnings, based on a two per cent rate of return.

“Depending on the terms of their current mortgage, they can likely make a 10 per cent per year additional lump-sum payment, which would be about $5,700 a year from now.”

They can use additional cash to pay off Linda’s student loans while saving the rest.

If they keep saving and making annual lump-sum payments until their mortgage is up for renewal in four years, they should have just enough in their TFSA — about $36,000 — to pay the mortgage in full.

http://ontariolandlords.org/blog/at-last-tenant-from-hell-moves-out/

http://manitobalandlords.ca/2012/10/07/landlords-the-2013-rent-increase-guideline-is-1/

http://albertalandlords.ca/2012/10/18/online-rental-scam-resurfaces-in-grande-prairie-alberta/

http://bclandlords.ca/2012/09/22/half-of-all-canadian-tenants-under-35-dont-have-renters-insurance/

Then they need to keep saving for their next home.

“If a fixer-upper rental home sells for $100,000 in seven years, they should have more than enough for the 20 per cent down payment to secure financing for the rental,” she says.

Yet even if their plan unfolds successfully, what Sylvester shouldn’t do is stop RRSP contributions. He might even want to start a spousal RRSP for Linda until she has full-time work to allow her to contribute to her own RRSP.

Chatain-White says an RRSP is more than a fallback plan. It makes tax sense, too. They get the benefit of tax-deferred growth over time, and they will also be eligible for tax credits when they retire.

“It’s advantageous to have RRSPs when they retire to ensure that they can access all the pension credits,” she says. “If they don’t have a work pension or an RRSP that converts into a RRIF (registered retirement income fund), they cannot receive this credit, so they would be leaving money on the table.”

Sylvester and Linda should also hire an accountant at some point. It’s not that they will need help with retirement tax planning — they will need tax advice to manage multiple income properties.

“Good tax advice ensures they claim all allowable credits, because their tax situation could get quite complicated depending how many rental properties they really acquire over time.”

Still, Sylvester and Linda have a few years before they’ll need an accountant. They’re looking at about six years before they will have enough money to buy their first rental property, and it’s likely a decade before they’ll be able to buy their second.

And there’s no telling what lending rules will be like at that juncture, Chatain-White says.

“In theory, if their residence is free and clear and their rental property has equity, they will likely be able to obtain a line of credit to acquire more properties if the rules are much the same.”

One note of caution, she adds.

“While real estate is a good asset, in tough economic times, it may not be quite so easy to find a buyer when they want to sell,” she says.

“Historically, though, Manitoba has had stable real estate markets, so that may not be a very big risk.”

Chatain-White says Sylvester and Linda are likely the biggest risk to achieving their goal because success hinges on their ability to pay down debt and save religiously. That’s a formula that can be very difficult to put into practice.

giganticsmile@gmail.com

Sylvester’s and Linda’s finances

INCOME

Sylvester: $50,000 ($3,180 a month)

Linda: $22,000 ($1,412 a month)

EXPENSES

Monthly: $3,974

DEBTS

Sylvester’s consumer proposal: $11,500; $610 a month payments

Mortgage: $58,000 owing at 2.5 per cent

Linda’s student loan: $6,500 at 6.5 per cent

Linda’s Visa: $3,500 at 20 per cent

ASSETS

House: $100,000 (estimated)

Sylvester RRSP: $2,100 in growth dividend mutual fund

Savings: $1,470

NET WORTH: $24,070

http://www.winnipegfreepress.com/business/finance/homes-sweet-homes-170807586.html

Multi-family homes skyrocket

http://www.winnipegfreepress.com/business/multi-family-homes-skyrocket-169428196.html