Category Archives: retiring welathy

Snowbirds rush to sell U.S. homes to profit from tanking loonie

Winnipeg snowbirds Greg and Erina Barrett are spending their last winter in their Arizona home. They just sold it for a big profit.

Greg Barrett and his wife, Erina, wouldn’t call themselves savvy investors. But the snowbirds have just made a killing in the U.S. real estate market.

They join a growing number of Canadians who bought U.S. homes for cheap and are now selling them to take advantage of rising U.S. house prices and a tanking loonie. Even with added costs such as a possible capital gains tax, many Canadians are still coming out far ahead.

“It just worked out for us and we’re blessed,” says Barrett, a 75-year-old retired social worker.

In 2010, the loonie was virtually at par and the U.S. housing market had crashed when the Winnipeg couple bought an Arizona home to escape Canadian winters.

“It was a fabulous deal,” says Barrett from their three-bedroom bungalow in San Tan Valley near Phoenix.

Recently, he and his 73-year-old wife contemplated selling to lighten the burden as they age. When they crunched the numbers, they couldn’t resist taking the plunge.

Thanks to the rebounding U.S. real estate market, they have just sold their Arizona home for 65 per cent more than what they originally paid.

Add the exchange rate with the loonie hovering around 71 cents US, and you could say the couple hit the jackpot.

“In Canadian terms, it’s double the boost,” says Barrett. “I’m walking on sunshine, and don’t it feel good,” he adds, quoting a favourite pop song.

snowbirds Greg Barrett Erina

The Barretts pose in front of the Arizona home they just sold. The Canadian couple must move out at the end of the month, but plan to rent to get their taste of sunshine in coming winters. (CBC)

Swamped with sellers

The Barretts’ Arizona real estate agent, Diane Olson, says she’s swamped with calls from Canadians itching to sell their U.S. properties to cash in.

“They are just saying, ‘It’s such an awesome and great opportunity.’ They were not counting on the foreign exchange going to where it is,” says the agent, who specializes in Canadian clients.

Olson says she has 29 Canadian-owned Arizona homes either on the market or about to be listed.

“I am zooming, zooming, it’s crazy!” she says while driving on a Phoenix freeway, heading to her fourth meeting that day with a Canadian client.

Diane Olson

Diane Olson stands in front of one of her many real estate signs in Arizona advertising a Canadian-owned home for sale. (CBC)

From buying frenzy to selling spree

It’s a reversal from 2010, when the loonie was around par. In 2011, it would hit $1.05 US. At the same time, U.S. real estate prices had taken a dive, triggered by the 2008 subprime mortgage scandal and financial crisis.

So Canadians — from snowbirds to investors — swooped into hotspots like Arizona and Florida to grab a piece of sunny real estate for a steal.

According to the American National Association of Realtors survey, for the year ending in March 2007, Canadians accounted for 11 per cent of U.S. home sales to international clients. But as the loonie climbed, so did Canadian deals.

From March 2011 to 2012, Canadian sales more than doubled to 24 per cent, totalling an estimated $15.9 billion US.

“It was a buying frenzy,” says Olson. “You could buy a brand-new house on the outskirts [of Phoenix] that was nice for $80,000 [Cdn].”

Fast forward to 2016. Thanks to a strengthening economy, U.S. house prices have shot up 30 to 50 per cent, says BMO economist Robert Kavcic.

Add the loonie’s recent decline, and some Canadian sellers of U.S. homes are making big profits, even after any tax hits. “They have made out like bandits,” says Kavcic.

Canadians fleeing Florida

In Florida, Brent Leathwood is also seeing a surge of Canadians cashing out. The real estate agent says that when the loonie was stronger — from 2009 to 2013 — virtually all his Canadian clients wanted to buy.

Now, he says, about 80 per cent of them want to sell their homes in the Sunshine State.

“They’re making a pile of money, some of these people,” he says.

But Leathwood adds it’s not just big profits that are encouraging people to sell.

He says there’s a high price to pay these days when hanging on to U.S. property. Suddenly everything from American property taxes to electricity bills have become more expensive.

“A lot of these people are feeling squeezed by the ongoing monthly costs of maintaining a residence as the exchange rate continues to go against them,” says Leathwood.

Both he and Olson expect the selling frenzy to continue as long as the loonie stays low.

“There’s going to be a wave of money going back to Canada,” says Leathwood.

The Barretts plan to keep some of their money parked down south.

They still want to spend their winters in Arizona, but from now on, they’ll rent — with a lot less responsibility and a lot more cash.

“I’m sitting here in paradise and I’m making money. It’s just an amazing thing,” says Greg Barrett.

Source: Sophia Harris, CBC News Posted: Feb 01, 2016

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Get your debt under control before building a nest egg

Financial experts say the key to saving enough for retirement is getting your debt under control early.

It seems obvious: save as much money as early as you can. You’ll benefit from compound interest and you’ll build a savings habit that will serve you well when your pay goes up.

But just because it’s obvious doesn’t mean it’s easy — or even possible.

Financial advisers know that real life — schooling, cars, homes, kids — can get in the way.

Three experts who spoke with CBC News say because people are investing in themselves early in their adult lives, the goal isn’t necessarily to save early so much as getting all their ducks in a row for later in life.

One of the most obstinate ducks to manage is debt.

“If you’re in your 20s or 30s, it would be nice to have some savings,” said Preet Banerjee, author of Stop Over-Thinking Your Money!

“But if you are starting a family, getting a new house, etc., it can be pretty tough. So I don’t think you should be freaking out that you haven’t started aggressive savings just yet.”

Though recent headlines suggest Canadians are in fact saving enough money for retirement, Banerjee says the general trend has been a decline in savings — a pattern he attributes to low interest rates and people “launching later,” waiting longer to leave school, get married, have children and buy a home.

Banerjee says that means savings are delayed, too, but he stresses that it’s not necessarily a bad thing, so long as people are moving in the right direction by reducing their debt.

‘Just start with the basics’

“Just start with the basics, which is being able to figure out your monthly cash flow and making sure that you’re running a surplus, and how to figure out your net worth,” he said. “You do those two simple things … you’re going to be in a fairly good situation overall.”

Don’t worry about investing until you’re in a position to invest, he said.

‘If you don’t have anything in savings by the time you’re 40 or 45, it’s hard to have a million by the time you’re 65. So the response is to avoid.’– Melanie Buffel, Money Coaches Canada

“Living within your means is quite a bit different than living at your means, which I think is what people naturally default to,” he said.

Cherith Cayford, a financial educator at CMG Financial Education in Victoria, stressed the importance of getting your debt under control early.

“For millennials the focus should be debt reduction, debt elimination, not putting on more debt, being very focused on that level before they start planning for their retirement.”

She said no 20-year-old is thinking about their golden years, anyway.

 

“We’ve got to get real,” she said. “I wouldn’t even be worrying about it in my 20s. Maybe start thinking about it in your 30s, but sort of position yourself so that you are debt-free so that you can actually start accumulating wealth.”

Cayford lays out a simple plan:

  • Establish a specific year when you plan to be debt-free. “It can’t be on the never-never plan.”
  • Focus on eliminating the debt with the highest interest rate, while making the minimum payments on the others.
  • Continue that process until all the debts are paid off.
  • Use the money with which you’d been paying down your debts to build life savings rather than “living higher.”

While many people, especially in the biggest cities, won’t pay off their mortgage until their 50s or 60s, it’s important to have a handle on it so savings can begin.

Without a proper debt-reduction plan, you might not save a dime until your 50s.

‘It’s going to be very difficult’

Cayford says that’s too late to save enough for retirement from nothing, and you’d likely have to rely heavily on Old Age Security and the Canada Pension Plan. That might mean living with less during retirement.

“It’s going to be very difficult, because CPP was only intended to replace 25 per cent of the average industrial wage,” she said. “And if you haven’t been able to max out your contributions, then that’s even less to try to live on.”

Preet Banerjee

Financial analyst Preet Banerjee says savings can quickly accumulate once your debts are paid. (CBC)

Melanie Buffel, a money coach with Money Coaches Canada in Vancouver, said if people begin saving only at a late age, they can become discouraged.

“It frightens people,” she said. “The numbers just don’t work. If you don’t have anything in savings by the time you’re 40 or 45, it’s hard to have a million by the time you’re 65. So the response is to avoid. This is when it becomes really important not to jump to the big numbers, which will add to the stress, which will add to the avoidance, and then they’re going to go into debt even further.”

She said when people start saving in their 40s and 50s, it’s important to have a clear idea of what they want their retirement to look like. What quality of life do you want? How long do you want to keep working?

Banerjee says if you can get your non-mortgage debts paid off and have a clear end in sight for a responsibly sized mortgage by your mid-40s, there’s no reason to panic.

Once debts such as the mortgage are paid off, people often find themselves with $1,000 to $2,000 free monthly, he said.

“That can do a lot of work for you,” he said. “That’s still a relatively long period of time for people to accumulate the savings they need to retire.”

Source: CBC News Posted: Jan 15, 2016 5:00 AM ET

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How to change your client’s mind on reverse mortgages

As more seniors look to this type of financing to help their adult children as well as finance their retirement, brokers can clear up these misconceptions.

“More Canadian seniors are looking to a reverse mortgage as a way to supplement their retirement income. For many, it helps them to remain in their homes as they age,” saysHomEquity Bank SVP of marketing & sales, Yvonne Ziomecki. “When it comes to finances, we want to educate Canadians on their options, and clear up misconceptions around the reverse mortgage.”

Ziomecki shared with MPA these Top 10 Facts That Will Make You Change Your Mind on Reverse Mortgages to help brokers clear up any misgivings that clients may have:

1) Once you are approved for a reverse mortgage, you are approved for life;

2) You can qualify for a reverse mortgage regardless of your credit rating or income level;

3) You will still have equity left in your home. Even after arranging a reverse mortgage, in most cases, HomEquityBank clients have an average of 50% of the equity left in their homes;

4) You can’t sign final documents without first receiving Independent Legal Advice. That means all Canadian seniors must receive independent counsel before a reverse mortgage can be arranged;

5) Arranging a reverse mortgage is not complicated. Some seniors have described arranging a CHIP reverse mortgage as “the simplest financial transaction ever arranged;”

6) Reverse mortgage rates are as low as Prime plus 1.25%;

7) Money is of course tax free, and can help you lower your overall tax liability;

8) If one spouse dies, there are no changes to the terms of the reverse mortgage. The loan does not have to be repaid and you don’t have to requalify;

9) Reverse mortgages provide you with an opportunity to diversify your retirement portfolio; and

10) We have different rules in Canada when it comes to reverse mortgages, so don’t look to U.S. sources for information.

Source: MortgageBrokerNews.ca   Donald Horne | 18 Jun 2015