In Ontario, a woman we’ll call Linda, 48, is an administrator for a large corporation. Single, she brings home $4,870 from her job each month and nets $536 from three condo rentals with an estimated market value of $1.85 million. Her mortgages on rentals total $980,000. Her spending totals $2,834 per month. Real estate, including her home, make up 92 per cent of Linda’s total assets.
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Linda wants to retire in four years and live half the year in a warm place. Her job comes with a defined benefit pension. She can back that up with rental income and $221,241 in her RRSPs. Her goal is to make $25,000 per year after tax, which could be enough for some of the warm spots she has in mind, but first she has to pay off $39,200 of personal loans including a $20,000 home equity line of credit she used to buy her rentals. If and when to sell her own home, valued at $650,000, and when to start CPP and OAS are related issues. She should also plan to spend at least 153 days a year in Ontario to maintain eligibility for health insurance while she is away.
Linda makes $250 per month in voluntary contributions to her company pension plan. Her spending is just $2,834 per month which is just 56 per cent of her take-home pay. She has paid off her own residential condo and she expects to sell her compact car when she retires. Diligent, she has estimated her retirement budget at $3,532 per month. The financial planning question is whether she can finance that for the length of time she has in mind.
Family Finance asked Owen Winkelmolen, a fee-for-service financial planner who heads PlanEasy.ca based in London, Ont., to work with Linda in order to resolve her issues. “Modest spending and profitable investments make it possible for her to achieve early retirement,” Winkelmolen explains.
Linda’s real estate investing pays relatively little in current income. But the properties have appreciated by $424,000 in just four years. Nevertheless, she is highly leveraged and nervous about her total debt, which, including her personal loans, is just over $1 million. She also worries that her own discretionary investments in financial assets via an employer-sponsored RRSP are too small. Her worry is justified, Winkelmolen says.
Structuring retirement income
To add security to her finances and to make her early retirement plans more likely to work, Linda needs to reduce her leverage first and, secondly, grow her assets. If she makes $2,000 monthly payments on her HELOC, the loan will be gone in 10 months. Her remaining personal loan on which she has not made periodic payments, would be gone in another 10 months.
Linda plans to sell her three rental properties as mortgages come up for renewal. Her equity in them is $357,000, $355,000 and $158,000. That will reduce her leverage and liberate cash.
Selling the rental properties three years before age 65 is also wise because it will ensure that Linda can avoid the Old Age Security clawback that would be triggered by hefty capital gains. The clawback, which reviews the last two years, has a present trigger point of $79,054 in annual net income. As the properties are sold, Linda’s cash balances will grow, as will her taxes. Some of the gains can go to her Tax-Free Savings Account, which has a present balance of just $75. She should be able to start filling her TFSA at 50 when her personal loans are paid off. By then, the present contribution limit growing at $6,000 per year, should have risen to $81,500 less contributions already made.
For three years from 52, when she retires, to 56, when she can start her defined-benefit pension, Linda can tap her RRSP for living expenses. Her tax rate will be about eight per cent — higher if she adds capital gains on properties she sells. During this period, her original monthly living expenses would decline from $2,834 to $2,434 via the elimination of $400 in debt payments. Subtracting $536 in rental income would leave her with a balance of at least $1,898 per month that she would need to cover with taxable RRSP withdrawals and capital gains. We can estimate the taxable RRSP drawdown at $150,000 for the period with whatever she doesn’t spend kept as liquid savings. Linda can put properties on the market at one per year as conditions allow in the three year interval between the end of her employment income and the start of her pension. The sales sequence will be hers to decide.
Linda can downsize her own debt-free home at any time with no tax on gains. At age 56, she will start receiving her defined benefit pension of $14,606 per year.
At 57, Linda can obtain the proceeds of sale of the last rental property if not already sold.
Her pension, plus annuitized income from her RRSP and the non-registered savings she has accumulated from the sale of the properties, would give her pre-tax income of about $52,600, depending on the timing of the sales and how long that money has had to grow. She would be taxed at an average rate of 13 per cent, Winkelmolen estimates.
At 60, Linda can take CPP if she wishes at an estimated rate of $6,480 per year, driving total annul income before tax to $59,080 per year. At 65, she could add Old Age Security income, currently $7,362 per year, but would lose a pension bridge benefit of $9,019. Her pre-tax income would be $57,423 per year. After 15 per cent average tax, she would have $48,810 to spend each year. That works out to $4,070 per month. That permanent income is more than her estimated retirement budget requirement, $3,532 per month.
“The plan to quit at 52 is financially doable,” Winkelmolen concludes.
Retirement stars: 4 **** out of 5
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Victoria Real Estate Market Sees 9.2% Increase In June – Business Examiner
VICTORIA – A total of 808 properties sold in the Victoria Real Estate Board region this June, 9.2 per cent more than the 740 properties sold in June 2019 and 76.8 per cent more than the previous month of May 2020. Sales of condominiums were down 3.2 per cent from June 2019 with 209 units sold. Sales of single-family homes were up 16.8 per cent from June 2019 with 460 sold.
“This June we saw competing factors from all different sides of the real estate equation,” says Victoria Real Estate Board President Sandi-Jo Ayers. “If all we do is look at numbers, we see a fairly normal June, in the midst of a very not normal world. The impact of COVID-19 on our entire economy continues. And while some buyers and sellers are slow to emerge from isolation, others have been highly active since the start of Phase 2 of BC’s Restart Plan. Because of the pandemics, an eviction order that prohibited a landlord from ending a tenancy was introduced. The order may have kept some homes from going to market. The portion of this order that prevented a seller from providing vacant possession of a tenanted home was lifted late this month, which may bring some listings to market that had been stalled. Due to the pandemic alone, we have multiple factors influencing the inventory and sales in our market.”
There were 2,698 active listings for sale on the Victoria Real Estate Board Multiple Listing Service at the end of June 2020, 11.3 percent fewer properties than the total available at the end of June 2019 but a 6.1 per cent increase from the 2,544 active listings for sale at the end of May 2020.
“Additionally, the Canada Mortgage and Housing Corporation announced changes that start July 1 which will reduce the borrowing power of some buyers who insure through CMHC,” adds Ayers. “This may have pushed some demand forward – although there are alternate suppliers of mortgage insurance. Ongoing low inventory levels also mean that we are seeing a fair number of multiple offers. The condo market is slightly softer in terms of sales numbers. This may be in part due to the recent strata insurance issues which caused concern for owners and sellers. The government promised this month to begin to address the insurance issue, so there may be some relief on the horizon. These are not normal days for local real estate, nor is this month a signal of a return to normal, regardless of the numbers. That said, buyers and sellers are successfully navigating our market with the help of local realtors, who know how to implement health and safety protocols and understand the complexities of our current market. As always, I recommend you consult your Realtor to understand what is happening in the moment.”
The Multiple Listing Service Home Price Index benchmark value for a single-family home in the Victoria Core in June 2019 was $861,800. The benchmark value for the same home in June 2020 increased by 4 per cent to $896,200, 1.2 per cent more than May’s value of $885,400. The MLS HPI benchmark value for a condominium in the Victoria Core area in June 2019 was $519,100, while the benchmark value for the same condominium in June 2020 increased by 1.3 per cent to $525,600, 1.6 per cent less than the May value of $534,300.
Fraser Valley Real Estate Board says sales double in June, buyers returning to market – Abbotsford News
Real-estate sales in the Fraser Valley are back on the upward trajectory after COVID-19 slowed the growth of the market for several months.
The Fraser Valley Real Estate Board (FVREB) said they saw 1,718 sales through their multiple-listing service in June, an increase of 113.4 per cent over May’s sales, and an increase of 31.5 per cent over June of last year.
“We’re cautiously optimistic. June’s numbers clearly indicate that the market is functioning in this challenging new environment and we’re returning to more typical activity levels,” said Chris Shields, president of the board. “[Buyers] are getting more comfortable with the new buying and selling process.”
He said that very-low interest rates, high demand over the previous three months when “the market was on hold,” and new Canadian Mortgage and Housing Corporation rules (which came into effect July 1) are all contributing factors.
The board says they had 3,456 new property listings in June, a 56.6 per cent increase compared to May’s 2,207 listings, and a 23 per cent increase over June, 2019.
There were 7,063 active listings by the end of June, an increase of 9.4 per cent from May, but a decrease of 17.1 per cent last year, according to the board.
“We can’t predict how our market will continue to respond during COVID, but what we do know is that historically, over 80 per cent of Fraser Valley buyers move within our region and half purchase within their own community,” Shields said. “People buy and sell for lifestyle reasons and currently, even during this uncertain time, conditions are favourable. The market is balanced, inventory is growing, and prices remain stable.”
The month saw an average sell time of 37 days for the region’s apartments, 30 days for townhouses and 31 days for single-family detached homes, according to the board.
The region’s benchmark price for a single-family detached home was $994,500 (an increase of 3.6 per cent from 2019), $559,600 for townhouses (up 1.9 per cent from 2019) and $435,300 for an apartment (up 3.3 per cent from 2019).
These are Burnaby's cheapest real estate deals. Not bad – Burnaby Now
COVID-19 has indeed unsettled our world.
And for the real estate industry, that means showings have been put on a halt. However, that doesn’t mean it can deny us the luxury of home browsing right from the comforts of our bedroom.
Let’s all take a COVID-19 news break and rest our eyes on roomvu’slatest roundup of Burnaby’s cheapest listings.
In light of the imminent tough economic waves coming our way, these cheap listings come at the perfect time and so are their locations.
Don’t belittle the price of these homes, as small can also mean convenient, light and bright, and even boast gorgeous views of the region’s beautiful mountains and waters.
So take a peek and check out the cheapest listings.
This is a 1 bedrooms, 1 bathroom Condo , listed for sale by agent Jacquie McCarnanfor $0.31 million
This property features:
Fantastic, large one bedroom condo for sale in Burnaby. The entire strata development is surrounded by green space making it an oasis in the heart of Burnaby North. This would make an excellent investment or a great way into the market for first time home buyers. The development is very close to shopping and transit. The building is well-maintained and permits both rentals and pets. Lots of building updates including re-piping, roof, windows, sliding patio doors, and elevators.
This is a 1 bedrooms, 1 bathroom Condo , listed for sale by agent Jacob Striganfor $0.32 million
This property features:
Exceptional value awaits. This centrally located, spacious 1 bed/1 bath unit is awaiting its new owners. Perfect for first time home buyers, students and down-sizers. Minutes from Simon Fraser University, Burnaby North Secondary and all the shops and restaurants that East Hastings has to offer. This unit has been tastefully updated and is in great condition. The home is on the quiet side of the building and has a very calm and peaceful outlook. Book your private showing today.
This is a 2 bedrooms, 2 bathroom Condo , listed for sale by agent Judy Chengfor $0.37 million
This property features:
Best price in Burnaby East area. Spacious layout, 1008 sq.ft. with 2 bedroom 2 full bathrooms, new kitchen renovation done recently. Steps to Edmonds Community Centre, Public Library, the new Low-Food Supermarkets in the KingCrossing buildings. Not far from Highgate shopping area with Save-On-Foods, Shopper Drugs Mart, Banks, Medical Office, Edmond Skytrain, ST. Thomas More Collegiate, Langley Farm Market, and so much more. Better than renting. (NOT allow pets & rental)
This is a 2 bedrooms, 1 bathroom Condo , listed for sale by agent Derek Pink PREC*for $0.39 million
This property features:
Beautiful updated 2 bdrm unit offers designer kitchen with maple cabinets & black appliances, laminate floors, fresh carpets & paints, large laundry room & a newer hot water tank. Very close to transit (yet, very quiet), SFU, no rental restrictions..a great opportunity. This corner unit is nestled in the beautiful forest settings of the Simon Fraser Hills has been updated recently with new carpets & paint. Enjoy 2 large spacious private patios with plenty of outdoor space. Amenities include outdoor pools, hot tub, exercise facility & more! Minutes from everything, close to schools & ready to enjoy! Hurry, this one will not last. Tenanted (but vacating) so showings scheduled by appointment only at specific time so please contact your realtor to arrange. Showings by appointment Sunday 2-4.
This is a 1 bedrooms, 1 bathroom Condo , listed for sale by agent Keith Ho PREC*for $0.39 million
This property features:
Altitude Towers at UniverCity community up at Burnaby Mountain. Up here you will find Simon Fraser University and all the facilities they have to offer, Highland Elementary School, Daycare, Nester’s Supermarket, SFU bus loop, and some restaurants and shops. The surrounding area is a quiet residential area with trails and parks. This unit is equipped for wheelchair accessibility. It features a line kitchen, modern stainless steel appliances, walk in shower, and a hot water heating that is included in the strata fees. Comes with one parking stall and a storage locker. Great rental potential to SFU students.
This is a 1 bedrooms, 1 bathroom Condo , listed for sale by agent Mandy Siu PREC*for $0.39 million
This property features:
THE HUB, a concrete, Canadian Green Building Council’s LEED Silver standard building. Located in the heart of SFU, UniverCity. This one bedroom / one bathroom home is perfect for first time buyers or investors! Features include an open concept plan, wood floors, a kitchen with SS apps, quartz counters & plenty of cupboards. The well sized bedroom offers excellent closet space and a large window. The covered balcony provides a view south-east views. Just a quick walk to Nester’s below for groceries. Close walk to transit, shopping, indoor/outdoor rec & a host of perks available only to UniverCity residents. 1 parking, locker included.
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