Tale of Risk Taking: Career Paths and Real Estate

Three Students Choosing Different Careers and Investments

Buddy A: Bought a Vancouver condo for $400,000 even in 2014, with 10% down. Rented it out and was about $1,000/mo. cash flow negative after condo fees, insurance, etc. Quit his job, and moved back home to his Mom’s basement. Then he went back to school on a student loan. Somehow he managed to plug in the negative cashflow with various odd cash here and there over the years. He then sold this property in 2017 for $630,000 approx. Afterwards, he went to law school and lived on that appreciation and an additional loan.

Buddy B: Bought a house 2 hours out of Vancouver for around $400,000 with family help with downpayment. Lived paycheque to paycheque and rented his basement and 2 extra bedrooms out to make his mortgage payments.

This as he commenced his Heavy Duty Mechanic apprenticeship and its associated education. In Year 1 of his program he made about $45,000/year; after his 4 years, he now makes $90,000-100,000/year working in Burnaby, BC. Current market value of his home is around $850,000 and he has graduated.

The catch is he needs the home to live in for his job, to store his tools, and to do mechanical work. This unless he sells to cash out and decides to just rent. Every time I’d visit the guy: his fridge and house were almost empty. He’s got a lot of dreams, investment ideas, and business ideas. Unfortunately after taxes, his house being a money pit, and the sky high living costs in that area: he has almost no extra money to do much, unless he keeps renting his extra rooms and basement out.

Buddy C: Stayed in school while living at home, then got a Master’s degree in Statistics. Graduated and landed a job. Pays $1,900/mo. of rent alone in Vancouver. Don’t know what his student loans are for the 6-7 years of total schooling and lack of income. Takes transit everywhere. Just gets by and does his own thing.

Decisions to Invest in Property

I remember us all having a similar conversation around the same time when we were buying our homes. In 2016 I also thought of purchasing in Vancouver area. Instead I took advantage of the collapse in oil prices and depressed property values: bought two properties of $328,000 and $296,000 each. Market rent for them has been 1,800/mo. and $1,500/mo., respectively. I’ve had one tenant since with 0 vacant months.



A similar unit in GTA or Vancouver region would had been closer to $500,000 at the time; close to $2,500-3,000/mo. carrying costs for similar rental rates. This coupled with much higher living costs and lower income if I relocated. I wanted to be cash flow neutral or positive instead of negative and closer to industry at the time. This as well as living in a home and region with lower carrying costs. I also was a part-time student through those years and the negative cashflow would had been extremely risky to service.

TL;DR: I sought present and near-future cashflow over uncertain further-future cashflow and appreciation.

No Risk, No Reward

Conclusion of this story has been that my buddies got rewarded for taking excessive risk at the time. The market these days is extremely unpredictable, whether it be job market or real estate. There isn’t really a perfect path.

I had my good years while they lasted and learned a lot more than I would have otherwise.

High School Graduate: Millionaire by Age 40

In theory if someone started working as soon as he/she graduated from high school at age 18, and consistently invested $1,500/month for a 8% YoY return: by age 40, he/she would have over a million dollars, in today’s dollars. There are people out there who do it and don’t see school and an X profession as a means to an end. Alternatively, you have “lifers” who are so used to their own routine – that they don’t see anything else after even decades:

– go to work;

– come home from work;

– eat, sleep;

– get paid, invest $X/cheque;

– ride motorcycle/car, watch TV;

– repeat above for decades.

We met a fireman who used to do the above for decades and eventually grew his portfolio to 14 rental properties. He didn’t seem very financially literate. Nevertheless, that did him a favour as he didn’t note what the market or his buddies were doing at any given time.

Easier said than done of course.