Investing Advice Please

[hudsam]

Sorry to completely highjack this thread but I too should be coming into a wee bit of cash shortly and can't decide if we should invest in a rental house or pay down our mortgage more.... I was looking for advice & thoughts

[katboss07]

Any good information to read on investing for new starters?
Thanks!

[lizzie bargain]

I was reading on CTV online news this morning that house prices are expected to go down over the next 5 years-of course this is only somebody's opinion and nobody has a crystal ball. If however you think this is likely, it may be worth while to pay down the mortgage on your current property rather than buying another house which may go down in value if this prediction of declining property values proves true. Of course none of his know your personal situation with regard to income, savings etc and whether you would prefer to top up RRSP's, RESP's if you have children( hard to beat the 20% the govt kicks in) or TFSA's. You can read books and make your best guess and consult with experts in making your decision. You can also look at moneysense.ca.

[momof5boys]

Sorry to completely highjack this thread but I too should be coming into a wee bit of cash shortly and can't decide if we should invest in a rental house or pay down our mortgage more.... I was looking for advice & thoughts

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I hate debt so, if it were me, I would definitely pay down the mortgage. Rentals are not all roses either - especially if you were to end up with someone in the house that destroyed the place. Paying down the mortgage would give peace of mind.

[momof5boys]

I was reading on CTV online news this morning that house prices are expected to go down over the next 5 years-of course this is only somebody's opinion and nobody has a crystal ball. If however you think this is likely, it may be worth while to pay down the mortgage on your current property rather than buying another house which may go down in value if this prediction of declining property values proves true. Of course none of his know your personal situation with regard to income, savings etc and whether you would prefer to top up RRSP's, RESP's if you have children( hard to beat the 20% the govt kicks in) or TFSA's. You can read books and make your best guess and consult with experts in making your decision. You can also look at moneysense.ca.

Regarding falling housing prices, I think it really depends on the area where you live. In my area, one side of town is way more expensive than the other and prices keep going up.

[brunt]

Sorry to completely highjack this thread but I too should be coming into a wee bit of cash shortly and can't decide if we should invest in a rental house or pay down our mortgage more.... I was looking for advice & thoughts

Unless you have a very large amount of experience renting out a house, I wouldn't touch it with a ten foot pole. When it is good, it is not bad, but when it is bad, it is horrible.

I also view paying down a debt as a sure thing proposition as compared to a maybe we will profit, maybe we won't for renting.

[brunt]

Any good information to read on investing for new starters?
Thanks!

You will probably want to start with ETF's. Check out Couch Potato Investing - http://canadiancouchpotato.com/

[brunt]

Regarding falling housing prices, I think it really depends on the area where you live. In my area, one side of town is way more expensive than the other and prices keep going up.

Bottom line here, if the average family cannot afford the average house, prices will fall if incomes do not increase.

Just because prices are currently increasing does not mean that they will continue to do so. Interest rates are far more likely to increase than fall, and that has a serious downward pressure on prices.

[blueeyetea]

Bottom line here, if the average family cannot afford the average house, prices will fall if incomes do not increase.

Or the prices will stay the same for a very long time. In my area, prices never go down. They just stay at the same level until the economy can support rising prices.

[endi2000]

p.s. By TXFA, do you mean TFSA (Tax-Free Savings Account), or am I just unaware of that acronym (Texas Forensics Association)?

Oops sorry - yes definitely TFSA

[anastasia1009]

Oops sorry - yes definitely TFSA

I came into some money too and some went to pay bills then the rest in TFSA. Then $100 a pay cheque goes in then when I save money couponing or deals I transfer that money over. Don't know what I am saving for yet.

[MortgageQueen]

One can also invest in a mortgage investment company. There's certainly many out there,(you need to check them carefully) but the best one I know, guarantees the invested amount and pays 12% ROI as well. What's awesome, is you can use your RRSP, TFSA, etc.
That said, it's always good to diversify your investments too, if you can.

[MortgageQueen]

Someone PM'd me to ask "how you can get 12% return on your investment when rates are so much lower?" So I thought I'd just explain here.

The investment is through a Mortgage investment company. This company provides 2nd mortgages (through brokers). As anyone whose ever had a 2nd mortgage before well knows, these mortgages are quite expensive.

Ironically, I don't personally use this company for my clients, because it's too expensive, but a large majority of brokers do (because they're less experienced in private money) Sadly, 2nd mortgages are very popular these days and business is booming.

So to answer the question, how can they produce 12% return on the investment? It's easy. They charge a lender fee up front which is generally anywhere from 2 to 5% of the loaned amount, than they charge 15 to 18% interest. This is generally for a term of 1 yr or less.
At that time, they flip the money over and do it again. The excess interest rate and Lender fee goes to the company and the 12% goes to the investor. They're very successful at it. There's a lot of people that do this on their own, but the risks are also all on them. . . .whereas the company guarantees the investment amount no matter what. . .which for most people is way better.

Hope that explains it satisfactorally.

[Natalia Smith]

I really appreciate information shared by Brunt. So many good and valuable information is shared by him. I think its beneficial for every individual. I am happy to find so many good points here in this post.

[brunt]

Someone PM'd me to ask "how you can get 12% return on your investment when rates are so much lower?" So I thought I'd just explain here.

The investment is through a Mortgage investment company. This company provides 2nd mortgages (through brokers). As anyone whose ever had a 2nd mortgage before well knows, these mortgages are quite expensive.

Ironically, I don't personally use this company for my clients, because it's too expensive, but a large majority of brokers do (because they're less experienced in private money) Sadly, 2nd mortgages are very popular these days and business is booming.

So to answer the question, how can they produce 12% return on the investment? It's easy. They charge a lender fee up front which is generally anywhere from 2 to 5% of the loaned amount, than they charge 15 to 18% interest. This is generally for a term of 1 yr or less.
At that time, they flip the money over and do it again. The excess interest rate and Lender fee goes to the company and the 12% goes to the investor. They're very successful at it. There's a lot of people that do this on their own, but the risks are also all on them. . . .whereas the company guarantees the investment amount no matter what. . .which for most people is way better.

Hope that explains it satisfactorally.

MortgageQueen, I just had to respond to this post.

Please don't take this as a personal attack - my nickpicky side is from an academic background where any idea is continually in "open season" for others to pick at in order to get to the bottom of the truth.

Bottom line - in today's rate environment, there is no way that you can guarantee a rate of 12%. It simply cannot be done. It is possible (but difficult) to get it, but quite another matter altogether to guarantee it.

This is not to say that the people with this company have any ill intent. In fact, as the failure of Long Term Capital Management has shown, even winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (I simply detest when the media call it the "Nobel Prize in Economics" - it isn't) cannot reliably return rates of return far in excess of the market without running the very real risk of blowing up spectacularly.

There are only three ways to get these kinds of returns: 1) big time luck, 2) high risk investments, or 3) margin. All three of these ways are pretty well statistically impossible to maintain over the long term.

If the big economic egg heads cannot see all of the risks they are taking on, I certainly would not trust some other company to be able to beat the odds. The market is indeed a harsh mistress.

Just my thoughts.