Young B.C. couple who are landlords while renting themselves risk wrecking their retirement

Situation: Couple pays more in rent than they collect as landlords, an unusual state of affairs

Solution: Move into the rental house, sell the leveraged condo to raise retirement income and cut portfolio risk

A couple we’ll call Phil, 33, and his wife, Penny, 36, live in the lower mainland of B.C. with their two children ages 1 and 4.  Phil is a company manager, Penny a health care professional. They bring home $12,492 per month, consisting of Phil’s $6,000 salary after tax, Sandy’s $3,400 after tax, $432 from the Canada Child Benefit, and nominal monthly rental income of $2,660.

Phil and Sandy have two unprofitable real estate holdings and a lot of idle cash. One property is a condo. The other is a house they rent out for income. Yet they pay rent to live in another similar house which they don’t own.

They have $937,000 of mortgage debt. The market value of the rentals is about $1.6 million so they have $663,000 equity in property. Property is 83 per cent of their total assets. However, property market values vary while what they owe to lenders is definite. This odd bind crimps their income.

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Penny and Phil live frugally, but their rental income depends on the state of the housing market and their own costs, both of which change from time to time. In the midst of the booming property market, the couple is confident that they have made the right choice of allocating their growing wealth to about 80 per cent property and 20 per cent financial assets. This balance is more risk than reward.

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