Toronto & Vancouver Home Owners are MEGA RICH?! (on average)
The average mortgage debt in Toronto is $194, 000 and 259, 000 in vancouver.
Given the average house price is in toront and vancouver is north of a million are we surmising that the average torononian is mega rich? It is very common to see properties selling for 2-3 million in Vancouver (with the average I'm sure nearing a million)...
So most people in toronto/Vancouver have at least a half a million in untapped equity. Why aren't people selling their homes, taking the million and retiring? Or better yet, leveraging that up to buy 20-30 properties in any rational market (not Toronto or Vancouver).
...
I'm still shocked at how low the average mortgage to house price ratio is. I assume most people bought these houses 10-20 years ago at rock bottom, have paid the mortgage down further, and are sitting on gold mines?! REFINANCE!!!!
If only London, ONTARIO experienced such appreciation...
How has the housing market been in London Ontario. I am looking into some properties there?
I agree with you @Michael Rosehart I bought my condo in 2014 for 200k and it has gone up to 300k now, I'm already itching to refi.
You might be surprised how far $1 Million DOESN'T go!
In most of the U.S., to have what used to be a middle-class lifestyle in retirement one needs north of $3.5 Million returning better than 8% in order to have any kind of a decent retirement.
There's only a point in borrowing equity out if you're going to arbitrage it: invest it in something which returns more than the P&I on the equity loan.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
@David Dachtera A middle class retirement requires 280k/yr USD? That's amusing. Maybe in the heart of New York.
@Michael Rosehart Here's an interesting little thought tidbit... the average home sale is >1m... that is not the same thing as saying that the average home is >1m. I'd be inclined to think that the people whose homes have appreciated ridiculously are more inclined to sell, therefore jacking up the "sold value" of home. Those whose homes have not inflated would be less inclined to sell.
With that said, yes, if I had a $1m house in Toronto, I'd sell it and buy a 100k cottage in eastern Ontario and be done. 8% return on my remaining 900k can buy a lot of snowmobile and boat gas. Unfortunately, I bought in St. Thomas.
A big part of it is lifestyle, 99/100 people don't invest and have no ambition to. For them it makes perfect sense to just pay that mortgage off and live debt free.
Also if someones living in Toronto and owns a home they love the city, there is really nowhere comparable to move to that is cheap and offers a similar lifestyle.
Friend of mine pay 2950/m for a 2 bedroom condo, because of location and lifestyle. Not logical but thats Toronto
Check your math. Those numbers should work out to circa. $10,000 / mo. Remember: you're only living off the interest without reducing the principle to ensure you don't "run out of money". Remember also to deduct income taxes (unless it's a Roth IRA), property taxes and everything else which saps your funds before you actually get them. I may have erred on the interest rate.
...and yes, some two-income professional households do bring in that kind of gross income prior to retirement.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
Fair points.
@matt Geerts - points well taken. Ponder this...if the houses next door to me sell for 1, 000, 000 whether I decide to sell mine or not mine is likely worth the same. Recent sale prices are all we have to go on to determine market value. Toronto & Vancouver markets are HOT. I have a friend whose parents 2+1 bedroom detatched home in Toronto was appraised at 950k. They purchased it 15 years ago for 250k. They don't think their home is worth 950k..i mean after all the identical sized home and lot in St. Thomas would go for 100k. Average people in Toronto are becoming millionaires.
@david dachtera - to each their own. I live in a 4 bedroom, 4 bath home (I know shame on me! It's not frugal or smart), I enjoy all the modern amenities in life (I eat out a couple times a month using Groupon or other deals), I have a newer Ford Focus in mind condition (yes we are a 1 car family!), and by all standards of appearance I look like a Mr. Jones. I live VERY COMFORTABLY on 2000/month. That includes my mortgage payment (2-year fixed financed at 1.84% thank-you very much!). Without a mortgage I could comfortably live on 1500/month and that includes having money for an annual sell-off vacation in the off-season to costa rica...
Anyway, at 8% return I could RETIRE permanently on a little over 300k...
However, that is in London, ON with a population below 500, 000 people (I think north of 400k?). The thing I can't comprehend is how my neighbours manage to spend 4000-5000/month on LIFE..and yet by almost all accounts I live a comparable lifestyle. Yes, I price match my groceries (using apps that do the leg work for me)...but why more people aren't economical about their personal lives is beyond me.
The greatest advice I ever received was Run your personal life like a business.
If you don't have a personal balance sheet and income statement DONE AT LEAST quarterly you are doing yourself a huge injustice.
I can't wait to retire next year on half a million, with a 100k emergency fund!!!
I wouldn't be caught dead living in Toronto or Vancouver! But I understand it's appeal ...
3,500,000 * 0.08 = 280k. I guess we have a different definition of middle class. I like yours better.
According to statcan the average household expenses are just over 80k a year.
http://www.statcan.gc.ca/tables-tableaux/sum-som/l...
Also according to statcan the median household income is UNDER 80k
http://www.statcan.gc.ca/tables-tableaux/sum-som/l...
Therefore the average Canadian is loosing money each year...
Maybe we might start seeing more families pulling money out of their homes.
The average mustachian family spends a little under 26k a year...3 mustachian families can live for the cost of one "AVERAGE Family." OUCH. I know I'd be embarrassed to call myself "average."
I can't seem to understand how that much money can flow through peoples hands...
It's like going to home depot and buying drywall at full price. I don't think I've ever paid more than $6 a sheet.. Don't people know how to negotiate deals, price match, or use technology to have the EXACT same lives for half? I guess not.
For instance, I can eat out with my wife for under 7$ a person at a sit down dinner..that includes $2 for tip. I suppose the AVARAGE Canadian family would sit beside me at the restaurant and have their bill total $75 with drinks etc...
TIP:
GROUPON + GROUPON PROMO CODES like 10$ off first groupon or 50% off flash sale.
Groceries...75$/week (150/week full retail price).
I suppose people decide to pay full price for things to save time? If only they knew how little time it takes...
Oh well, their inefficiencies are my gains. :)
I live so frugally that my wife and I can save a fresh 20% down payment on a home every 9 or so months...
Lack of capital isn't really a thing if you work full-time and live frugally. Financial Freedom is inevitable for a frugal person that runs their personal finances like a business.
@Matt Geerts - if I could double vote your comment I would. I like his definition of middle class too.
There was an interesting article I read the other day on everyone thinking they are middle class. The nurse that makes 90k a year..or the high school teacher that cracks 100k thinks they are middle class. The fact is they are the top 5%...they **** on 95% of other people and are pretty well upper class. Two teachers...a nurse and a police man. A fire fighter and a government city admin worker...all top 10% of society.
I love it when I read articles in the globe about "middle class families" when they are really talking about people who have net family incomes well above 160k/year.
Food for thought - everyone thinks they are middle class.
London Ontario has a median household income of 75k...that means a median couple should bring in about 37, 500 each. If you make more than that you are actually in the upper middle class...
If only people learned personal finance in the school system. I could gripe about this all day. But alas I can't change folks all I can do is get ahead of them all with what I know...
I think you guys are forgetting that averages mean nothing on a grand scale....
Stats Can is to be taken with grain of salt. If you have 10 people, 1 makes 1 million and 9 make nothing, on average they make 100k each. Obviously that's not accurate, but something similar is going on in those markets.
I compile my own stats through raw data by using medians for real estate, stats can averages are just a good secondary citation.
Biggest misconception in the Toronto and vancouver market is that people own, majority rent. Therefore the household income has little to do with the affordability in correlation with home prices. Most people who own there bought years and years ago, and the people buying now, research suggests are using OPM to borrow for down payments mainly parents, or selling and moving up.
Most people are NOT investors, when they get a raise they say: We have an extra 1000/m coming in, that means we can afford a bigger house new car etc.
I think personal finance is important, but if everyone knew how to maximize there $, I can imagine there would be a lot less left on the table for us.
Originally posted by @David Dachtera:
You might be surprised how far $1 Million DOESN'T go!
In most of the U.S., to have what used to be a middle-class lifestyle in retirement one needs north of $3.5 Million returning better than 8% in order to have any kind of a decent retirement.
There's only a point in borrowing equity out if you're going to arbitrage it: invest it in something which returns more than the P&I on the equity loan.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
Where did you pull that number out of? Give me $3.5 Million, earning ZERO PERCENT, and I can live very comfortably in Hawaii, eating out at nice restaurants, taking 3-4 international vacations PER YEAR for $100k per year. That will let me live from age 60-95. I would call that middle class at least, and that's assuming 0% interest on that initial $3.5M.
Originally posted by @Andrey Y.:Originally posted by @David Dachtera:
You might be surprised how far $1 Million DOESN'T go!
In most of the U.S., to have what used to be a middle-class lifestyle in retirement one needs north of $3.5 Million returning better than 8% in order to have any kind of a decent retirement.
There's only a point in borrowing equity out if you're going to arbitrage it: invest it in something which returns more than the P&I on the equity loan.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ BenedictWhere did you pull that number out of? Give me $3.5 Million, earning ZERO PERCENT, and I can live very comfortably in Hawaii, eating out at nice restaurants, taking 3-4 international vacations PER YEAR for $100k per year. That will let me live from age 60-95. I would call that middle class at least, and that's assuming 0% interest on that initial $3.5M.
So, you're ***-u-me-ing perfect health, no injuries / accidents, no natural catastrophes (hurricanes / cyclones, wild fires, volcanic eruptions, ... at least two of which are common in HI), vehicles which last forever and never need to be replaced, destruction-proof housing and furnishings, ...
... and if you CAN live that lifestyle in HI on $100K / yr (most people can't in ANY state), why are you not teaching personal finance at the university level? (Oh, yeah - I forgot. They don't teach that in school.)
...and did you remember to figure taxes into the scenario? ... or did you ***-u-me that the funds are in a Roth-IRA? What about property taxes?
Better run your numbers again. This time, think not like an uneducated consumer but as an educated entrepreneur. Otherwise, by failing to plan you're planning to fail.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
David dachhtera - how can you spend 100k/year?
You realize 95% of America lives on less than that.
If you buy a car that is 3 years old at a little below market value, you can usually resell it on kijiji/craigslist for about what you paid for it. Therefore, no car cost.
My budget includes basic insurance on my car, gas, and maintenance. That's 200/month...
In Canada there is free healthcare.
The chance of natural disaster is something like .1%...so 99.9% of the time you just have excess funds...so sure, maybe pad in an extra 100k to ensure you have some room for these things (assuming insurance doesn't cover it all?).
If structured properly you can earn 50-60k pretty well tax free using a number of different strategies.
You should check out Mr. Money Mustache - a great resource with millions of followers who are living great lives on about 1/4 of what you think is "barely livable."
Let's be clear the average American has a net worth of less than 100, 000. Average net worth not including their principle home equity is around 25, 000. So, if you have 1, 000, 000 net worth you are already by definition way above the middle class.
If you have 3.5 million in net worth you likely are the ULTRA rich top 1%...
We all strive for that, but you can't say the spending of a millionaire lifestyle is middle class...
Someone living a nice life in an average house, eating out once a week at a budget restaurant can live comfortably on 30k a year. It would take 10 families living this middle class lifestyle to spend 350k...
I just...I can't believe how consumeristic the American society is. It's kind of great for me. When I retire at 30 with a million net worth I'll be the "ultra rich" by definition. Kind of sad how easy it is to get there. Work full time and earn an average Canadian wage, live frugally, and invest the difference. Boom you are a millionaire in 10 years...
The problem with most people is that no matter how much they earn they will just increase their spending accordingly...in most cases only enjoying marginal increases to their standard of living.
Originally posted by @David Dachtera:
Originally posted by @Andrey Y.:
Originally posted by @David Dachtera:You might be surprised how far $1 Million DOESN'T go!
In most of the U.S., to have what used to be a middle-class lifestyle in retirement one needs north of $3.5 Million returning better than 8% in order to have any kind of a decent retirement.
There's only a point in borrowing equity out if you're going to arbitrage it: invest it in something which returns more than the P&I on the equity loan.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ BenedictWhere did you pull that number out of? Give me $3.5 Million, earning ZERO PERCENT, and I can live very comfortably in Hawaii, eating out at nice restaurants, taking 3-4 international vacations PER YEAR for $100k per year. That will let me live from age 60-95. I would call that middle class at least, and that's assuming 0% interest on that initial $3.5M.
So, you're ***-u-me-ing perfect health, no injuries / accidents, no natural catastrophes (hurricanes / cyclones, wild fires, volcanic eruptions, ... at least two of which are common in HI), vehicles which last forever and never need to be replaced, destruction-proof housing and furnishings, ...
... and if you CAN live that lifestyle in HI on $100K / yr (most people can't in ANY state), why are you not teaching personal finance at the university level? (Oh, yeah - I forgot. They don't teach that in school.)
...and did you remember to figure taxes into the scenario? ... or did you ***-u-me that the funds are in a Roth-IRA? What about property taxes?
Better run your numbers again. This time, think not like an uneducated consumer but as an educated entrepreneur. Otherwise, by failing to plan you're planning to fail.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
Its not that I can. I do. I DID exactly that, the last 5 years. There are no numbers to run buddy. I am a real life case study.
I drive a car that I bought cash (not expensive, about $15k), you need to buy right. I pay a mortgage. I take on average 2 international vacations and 2-3 mini-vacations per year. I eat out 5-10x per week in the most expensive state for food. I don't even budget. And I save money each year doing just that.
Quoting you "one needs north of.." ONE, like you said. Maybe you meant to say one family? In that case, for a large family I can see your point. But, you didn't say that.
As others had expressed in this thread, with all due respect, your numbers are inflated. Are they helpful for Grant Cardone-like thinking? Yes. But your cost of living estimate? Nah.
#2 General Landlording & Rental Properties Contributor
I have no problems understanding why so many people spend beyond their means. They live for today and do not think past their next whim. They believe they make money for the sole purpose of enjoying life today and from one perspective they are not wrong.
Who cares. They are the people that will make us all rich.
@David Dachtera Please explain how you got your numbers. I am with @Andrey Y. as I live a similar lifestyle with less than he does. Also there is no such thing as perfect health or no natural disasters but thats why you have insurance. FYI none of those things are common in Hawaii. Last hurricane to do damage to Oahu was Iwa in 1982. Volcanic eruptions only happen on the Big Island and only affect one part of the island. Wild fires that damages homes are also rare.
@Royce Talbo, et al,
Remember to take into account the time value of money.
Inflation means costs go up while the purchasing power of each dollar goes down.
You also mentioned (medical) insurance. Remember also co-pays, annual deductibles and plan-year and lifetime maximums.
As for natural disasters, remember that you're talking "historically". Plate tectonics is of special importance right now, especially in the Pacific Rim. Active eruptions and earthquakes are changing pressures on areas which have not seen "major" seismic activity in so long they are overdue, some by decades, some by centuries or even millennia. Yellowstone is certainly not the least of these.
Just because an event is rare does not mean it can't harm you or cause you unexpected expense. A town just north of me - Plainfield, IL - was hit by an F5 tornado some 26 years ago come fall. First ever since records were kept, not seen since. Leveled a high school and just missed the historic downtown district.
What looks like prosperity or a small fortune now may just barely exceed the poverty level decades from now. Compare today's salaries and prices to just 30 years ago. Going back even further - In 1979, I started my first job out of computer school at $12,500 / yr, more than my Dad ever made as a blue-collar worker. That's below the poverty line today.
I'm glad you're able to live a Platinum lifestyle on a tin-foil budget. The rest of us need to continue to invest for income to provide for ourselves, our loved ones and our heirs and posterity.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
@ David Dachtera - If you invested that 12, 500 it would likely outpace inflation.
The 3.5 million invested would also likely outpace inflation if you withdraw 4-6% instead of the 8% you are getting.
I am on the same page when it comes to investing for income. We just differ in how much we need to sustain our lifestyle. I could have 5 properties that cash flow me net 3000/month and live comfortably with my family of 3 on it. You may need 30 properties to sustain your lifestyle. As other commenters have mentioned, it's a lifestyle choice. I could choose to eat out wherever, with no groupons or deals and pay full market price - easily blowing $150 in a night. Or, I could go to the same restaurant with a groupon and eat relatively the same for about $20. The difference is I need $130 less. If you do this 15x in a month all the sudden you need an extra $1000+/month. To sustain that monthly expense you now need an extra million in investable assets.
One can cut the spending and therefore only need half a million or a million in assets to retire. I'm not talking cutting the lifestyle - I'm talking about going to the same resort as you on vacation and paying half what you paid. I'm talking about sitting next to you at a restaurant and paying half what you did and eating relatively the same thing. I'm talking about looking at my neighbour knowing I pay half the mortgage he does because I negotiated a 1.84% 2 year fixed and he has a mortgage that is +/-4% interest rate...
Same thing at the grocery stores...
Etc.
My efficiencies are my gains. The same can be said renovating properties. If you can do a 30k renovation for 20k, that 10k difference is pure gain in your pocket. The lazy investor may say, oh well it's a 30k renovation and that's market value...I'm not going to try to do it more efficiently because that's too much work. I'm going to accept that it costs 30k and so it must cost 30k for everyone else.
The reality is people are relatively ignorant and inefficient.
The lion share of American households can live on well below 100k/year. A select few efficient households live the same lifestyle as the 100k people by spending half more efficiently.
$12,500 was my gross salary. So, I got around $8K net before benefits.
8% is not a withdrawal - it's the ROI.
Working people prefer to have a life than devote their time to bargain hunting. For good or bad.
After deductions and living expenses we typically have around 7% of our gross pay to save for retirement or invest for the future. That's why having a business for income is so important.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
Originally posted by @Michael Rosehart:
The average mortgage debt in Toronto is $194, 000 and 259, 000 in vancouver.
Given the average house price is in toront and vancouver is north of a million are we surmising that the average torononian is mega rich? It is very common to see properties selling for 2-3 million in Vancouver (with the average I'm sure nearing a million)...So most people in toronto/Vancouver have at least a half a million in untapped equity. Why aren't people selling their homes, taking the million and retiring? Or better yet, leveraging that up to buy 20-30 properties in any rational market (not Toronto or Vancouver).
...
I'm still shocked at how low the average mortgage to house price ratio is. I assume most people bought these houses 10-20 years ago at rock bottom, have paid the mortgage down further, and are sitting on gold mines?! REFINANCE!!!!
I think it would help if we had some clarification on the statistics.
1) When you say "average" are we talking about the mean or median?
2) When talking about the "average mortgage" does this include houses with no mortgage as a score of zero? Or does this "average mortgage" only apply to houses with a mortgage?
One real estate book that I read said something like 60% of the houses in the United States don't have a mortgage. However, I don't remember which book and can't verify the accuracy. Does anyone know the actual percentage of mortgaged personal residences in the U.S.?
