Words fail us... Toronto's Condo King Brian Lamb's latest sales pitch.

"If you’d rather not eat cat food in your retirement, you’d better invest in condos."

- Developer Brad J. Lamb.

Toronto condo developer Brad Lamb says inadequately funded pension plans and limp RRSP returns will not meet Canadians’ retirement needs. So unless you want to eat cat food in your retirement, you'd better invest in condo's.

Yes, we're not making this up. This is the message Toronto's Condo King has for the masses as he presented a free workshop on real estate investing to some 340 people at The Westin Saturday in Ottawa, as reported in the Ottawa Citizen.

Of course Lamb's development company is constructing the Gotham and SoBa condo towers in Ottawa, which is what brings him there to hold the "free workshop".

His investment advice?

Factoring in inflation, he says that someone retiring 30 years hence will need $2.1 million for a pension of $50,000 a year in today’s dollars.

To get there he recommends you buy, rent and re-sell urban condos in a market that, based on the past 30 years of real estate performance in Ottawa, Lamb believes has nowhere to go over the long term but up.

Lamb’s strategy?

Scrape together $20,000 (that’s your down payment on a small condo that is also your own residence) and using what he called conservative projections of 4% annual growth in real estate values, Lamb says you’re soon able to use the equity in your unit to buy a second one. You rent that out for enough to cover its mortgage, condo fees and other costs and eventually sell it for a profit.

You continue buying, renting and re-selling units — all the while upgrading the one you live in — until you have a portfolio of five rental condos.

Lamb figures it will take you 12 years to do this.

Once you have achieved this nirvana, you then sit on the properties, with your tenants paying off your mortgages, for another 13 years. Twenty-five years after making your initial investment, you have enough assets to retire.  At least according to Lamb.

After the workshop he confided to the Ottawa Citizen newspaper that it annoys him that:

“our education system doesn’t teach (retirement planning)."

Which, presumably, is why Lamb was holding the 'free workshop.' Of course Lamb added:

"Also, it doesn’t hurt that I own properties, and some people (here) will buy some units."

What is that phrase, "past performance is not an indication of future results." Isn't there a valid reason that securities law requires that disclaimer?

You have to wonder if each workshop attendee also received a free bottle of snake oil as they left the seminar with Gotham and SoBa condo brochure in hand?

(hat tip Ben Rabidoux)

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Ottawa Citizen Newspaper chastises Federal Government on debt message

Yesterday the Ottawa Citizen newspaper chastised the Federal Government on it's mixed message about Canadian debt.

Here is the content of their editorial:

OTTAWA CITIZEN MARCH 10, 2012 

Why is the federal government warning Canadians about debt while it is encouraging aggressive mortgage lending?

When it comes to interest rates and housing prices, it's difficult to see the thread of consistency in federal government policy. Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty frequently warn Canadians that levels of household debt are too high. At the same time, the Bank of Canada's low interest rates make possible the low mortgage rates that are fuelling the housing market.

The government encourages risky mortgage lending even more by facilitating it through the Canada Mortgage and Housing Corporation. The government-owned mortgage insurer charges a substantial premium to home buyers with less than 20 per cent to put down, a federally mandated practice that effectively takes the risk out of mortgage lending for Canada's banks.

As concerns about a contraction in Canadian housing prices increase, the CMHC is finally getting some long overdue scrutiny. This week, the Ottawa-based Macdonald-Laurier Institute recommended a thorough review of how Canada finances mortgages. The institute questioned whether home buyers are paying too much for CMHC mortgage insurance, a fee which can be up to 2.9 per cent of your loan, higher if you are self-employed.

This mortgage insurance fee costs home buyers thousands of dollars, and the institute asks whether the fees are unduly high. The fact that the CM-HC has returned profits to the federal government of $14 billion over a decade suggests that this is a cash cow.

Other organizations, including the International Monetary Fund and the C.D. Howe Institute, are worried that the publicly owned CMHC has taken on too much mortgage liability, exposing Canadian taxpayers to undue risk. While there is a debate about whether Canada has a housing bubble, housing prices have increased 44 per cent since 2006. The CMHC's total loan insurance portfolio is now $541 billion, up from $350 billion in 2007. The Howe institute has suggested encouraging private mortgage insurers to play a larger role.

The main question, generally unasked, is why a federal agency has to take the risk out of mortgage lending for Canada's big banks. It's particularly pertinent with banks lowering rates again this week as they fight for more lending businesses. Normal businesses take risks. Why not our banks?

Our financial leaders say they are against debt, but their policies encourage it, and the government makes a tidy profit off insuring it. As long as those policies persist, they should spare us the lectures.

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