Pensions are becoming a hot item as baby boomers start to retire and soon figure out that they have not saved or accumulated enough assets to retire. The real problem is that people cannot save enough to retire and if you do not have a defined benefit plan – read government and teachers – you are screwed!! I had a friend who maxed out his RRSP for 30 years – accumulated over a million bucks – and figures that will pay him out about $55,000 per year. Not even close to a teacher whose pension is also indexed for inflation. Now most of us never max out our RRSP and that is the problem.
What to do? Banks and other wealth managers want to increase the limits for RRSP contributions but that won’t solve anything. My solution is to get a SELF DIRECTED RRSP. Save $75,000 and then buy a $300,000 condo (probably the cheapest and easiest form of real estate investment for the average person). In 25 years, the condo will be paid off through renting it out and with just 4% annual appreciation; you will have an asset worth $800,000! Do it twice and you can retire!!
Even real estate agents have trouble figuring this out! We have a couple of agents who borrowed big to invest in the stock market and guess what? The returns from their investments cannot pay off their loans! If only they had stuck to what they know best. Most people can accumulate three properties in their working life besides their principal residence, and they can retire. Seems simple to me but what do I know??
What about the increase in condo fees over the years, say 10-15 years? It could/would severely affect your rental property’s positive cash flow and/or resale prospects.
Good question. But rents will increase too. We did not want to get too bogged down with the math. We never took into account the positive cash flow after making mortgage payments, taxes, and condo fees by putting 25% down. That is an extra bonus.