New and would appreciate some advice

[justaquestion]

Hi all,

I found this site on google just looking for a bit of advice from those that potentially do financial planning for a living, so here goes...

A bit of background about my financial self:
- I'm 24
- Live in Vancouver, Canada
- Own my apartment debt free (inherited) which has a value of around $450,000 CDN (which is approx. the same in USD for those that are unsure of currency rates)
- Make around $80,000 gross annually
- I've been keeping between $10,000 - $15,000 in my bank account for the past year and I spend money on trips, etc any time I've exceeded that amount

My Questions:
- I know that owning an apartment debt free definitely has some big advantages and I'm hoping somebody can point me in a direction that can be profitable?
- Would it be a good idea to acquire another property and rent it out?
- Loans / Mortgage available is more lax because of my net worth (approx. $500,000)?
- Any other advice if you were in my position?

Thanks in advance for the feedback and look forward to your responses.

[Retired To Win]

Hi all,

I found this site on google just looking for a bit of advice from those that potentially do financial planning for a living, so here goes...

A bit of background about my financial self:
- I'm 24
- Live in Vancouver, Canada
- Own my apartment debt free (inherited) which has a value of around $450,000 CDN (which is approx. the same in USD for those that are unsure of currency rates)
- Make around $80,000 gross annually
- I've been keeping between $10,000 - $15,000 in my bank account for the past year and I spend money on trips, etc any time I've exceeded that amount...

JustAQuestion,

I am going to give you advice that is unsolicited, that you will probably find unexpected, and that I mean sincerely.

Given the financial data you have provided about yourself, I would strongly advise that you look hard into the real feasibility of taking early retirement -- or, if you prefer, becoming financially independent -- possibly as soon as by the time you are 30 to 35. You've got one hell of a good start in terms of assets and income. Now what you need to do is a heavy-duty mindshift with regards to the balance between your spending and your saving/investing.

For a start, I offer some of my financial planning posts as food for thought. You can find a list of them at
Index to All My Financial Planning Posts:

http://retired-to-win.savingadvice.com/2014/04/01/new-index-to-all-my-financial-planning-p_108054/

IF you like what you read, then go really heavy duty and find the MrMoneyMustache blog and immerse yourself in it. I think your mind will be blown (by a fellow Canadian, I might add).

Good luck.

[justaquestion]

Thanks Retired to Win. I'm checking out the link you provided me with.

I think I should have mentioned this as well, I have some large aspirations in terms of where I'd like to be financially. I really can't picture myself retiring per se. I like working, and making money. Might sound a little ridiculous, but I'd like to own a private jet at some point. I'd like to have my finances working optimally for the next few years so I can increase my net worth as much as possible.

I don't know if that made sense lol, but thanks again!

[Nika]

Suggesting that a 24 year old with good income potential "retires" seems extremely weird to me. Should he scrape by to make that money last possibly 70 more years? There is risk and volatility at some point through that many decades, and not even real estate is exempt from it. He has real potential to get himself into a much more secure position than most of his peers, so suggesting that he just give up on growing at 24 seems weird to me.

If I was in OP's place, I would start investing. He already got 450K, or about 98% of his assets tied up in real estate, so investing in something else (like the market) would be diversification and a good first step. Having no mortgage allows you to really ramp up your savings.

OP, if you want to try higher risk/reward ventures in your future (like starting a company or joining a start-up, investment, working overseas, etc...) you need a much bigger cushion than 10K.

[justaquestion]

Suggesting that a 24 year old with good income potential "retires" seems extremely weird to me. Should he scrape by to make that money last possibly 70 more years? There is risk and volatility at some point through that many decades, and not even real estate is exempt from it. He has real potential to get himself into a much more secure position than most of his peers, so suggesting that he just give up on growing at 24 seems weird to me.

If I was in OP's place, I would start investing. He already got 450K, or about 98% of his assets tied up in real estate, so investing in something else (like the market) would be diversification and a good first step. Having no mortgage allows you to really ramp up your savings.

OP, if you want to try higher risk/reward ventures in your future (like starting a company or joining a start-up, investment, working overseas, etc...) you need a much bigger cushion than 10K.

Thanks Nika.

Taking into account the responses I've received, I'll reword my question(s)...

A little background first:
I am currently making a deal with my current employer to own an off-chute of our current business that is to be handled online remotely by myself and I will be 50% shareholder. So, as for your recommendation of starting a company, I am already doing that and have enough capital (from current employer) to back the start-up. Anyways, I'm getting off track. As for my revised question.

Is it optimal for me to keep the majority of my net worth (as you stated - 98%) tied up in my one property? Any other options?

Thanks again!

[Retired To Win]

Suggesting that a 24 year old with good income potential "retires" seems extremely weird to me. Should he scrape by to make that money last possibly 70 more years? There is risk and volatility at some point through that many decades, and not even real estate is exempt from it. He has real potential to get himself into a much more secure position than most of his peers, so suggesting that he just give up on growing at 24 seems weird to me...

I did not say he should "give up growing at 24". I said he had a real shot at becoming financially independent by the age of 35. At that point, he could/would be free to do anything he wanted. Including continuing to work, but with a big pile of F-YOU money if his bosses hassled him too much.

BIG difference there.

[creditcardfree]

Just an FYI to the original poster, most of us here at Saving Advice are NOT professional financial advisors (although I think there are few). We are simply experienced savers with varying degrees of risk and knowledge. Keep that in mind as you read.

[Nika]

Thanks Nika.

Taking into account the responses I've received, I'll reword my question(s)...

A little background first:
I am currently making a deal with my current employer to own an off-chute of our current business that is to be handled online remotely by myself and I will be 50% shareholder. So, as for your recommendation of starting a company, I am already doing that and have enough capital (from current employer) to back the start-up. Anyways, I'm getting off track. As for my revised question.

Is it optimal for me to keep the majority of my net worth (as you stated - 98%) tied up in my one property? Any other options?

Thanks again!

Great, you are doing very well.

As for the apartment... do you live there right now and do you love it? Do you see yourself living there long-term or when you have a family? You could maximize it if you wanted to -- get a very well screened roommate from your old college friends or rent it out and get a cheaper place...

I would probably just keep it and start building investments as fast as I can. You have enough disposable income to do so and very shortly you can make this place 50% of your net worth.

[parafly]

If I was in your position, I would primarily focus on building up equity investments as well as liquid accounts at this stage. Investing in the market will give you some diversity from your real estate heavy portfolio and provide more long term security. Building up liquid savings will give you the ability to jump on entrepreneurship opportunities as they arise in the coming years.

This advice is based on my impressions of your goals and skills in life from the little information you've shared.

[snafu]

justaquestion, a $450K condo in Vancouver merely speaks of the inflated RE market, thanks in the most part to HKK investors. Being a landlord requires very specific skill sets. You need to be an excellent judge of character with little information, patient beyond reason and able to fix anything that breaks or gets damaged. There is likely a Landlord Assoc. whose members can offer insight.

I didn't see a TFSA listed which is an opportunity lost at the moment. You could gently enter the stock market with an ETF like ZRE-T or XRE-T as you prefer. XIN-T. If you prefer Mutual Funds I suggest you start with two no fee, low MER [Management Expense Ratio] Index funds one for Canada [holding familiar names] and USA Index. You didn't list an RRSP and that has positive tax benefit. You may like Dollar Cost Averaging [DCA] programs.

*sorry to have so many acronyms, just Google anything unfamiliar*

Delighted to see your involved in a business as it's not smart to 'put your eggs all in one basket.' If I were to seek a new direction, I think I'd visit S Korea to explore business opportunities. There is a newly signed Free Trade Agreement and Koreans are educated, focussed and do not shirk hard work. I'd spent about 7 years working in PR China intermittently and did my best to avoid corruption encountered. In my experience no contract was worth the paper it was written on.

[ua_guy]

Might sound a little ridiculous, but I'd like to own a private jet at some point.

I don't know if that made sense lol, but thanks again!

Yes, it does sound ridiculous, and no, it doesn't make sense. Even rich people lease time on private jets, and then there's Warren Buffet who still rides regular old commercial aircraft for many of his trips.



Your aspirations are admirable. Just remember that you might get tired of work-- not because you get lazy or lose your will, but there are so many other things to enjoy in life other than money or doing work in exchange for money.

[Eagle]

Is it optimal for me to keep the majority of my net worth (as you stated - 98%) tied up in my one property? Any other options?

Hi Justaquestion. Welcome to the forums.

How much have you invested in your Canada Pension Plan (CPP) and Old Age Security (OAS)?

Does your company offer a private pension option?

Does you employer match anything (much like a 401k) here in the U.S. or are you considered self-employed/contract labor?

Have you considered index funds or mutual funds?

Welcome again! Looks like you are on the right track!

[Gailete]

Unlike some of the other posters here, I wouldn't consider your paid off apartment as your net worth portfolio. You will always need a place to live and currently you are in it. From what details you did mention, it doesn't seem like you have much in savings at all. You make a great income for someone your age and with a paid off place to live (other than taxes and maintenance) you should be saving a lot more money in whatever is the best means of doing so in Canada. Just having money in your account doesn't mean that is all you need to have. Getting laid, off or worse yet disabled having a free apartment will be great, but unless you have money put away for day to day needs that apartment will be going up for sale real quick and instead of being a cushion will be something you are living on. But perhaps you forgot to mention what you have in the way of investments or retirement.

[cardtrick]

I was just in Vancouver a couple of weeks ago. Driving down Granville, I noticed multiple continuous stretches of "For Sale" signs. One stretch was 10-15 signs long. Vancouver is a great city and one day prices will be much higher than they are now. It could be a major major port city considering its location. But, I would be wary of buying right now with the market just starting to slow down.


Did you run some numbers? Figure out what your monthly payment will be and how much in rent you can get?