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Hello, this is my first time to the forum and wanted to ask others their opinions on my financial matter..

To give a bit of background; me and my significant other are in our mid to late 20's, have some debt (student loans 20k) own no property but do own a car. We have minimal savings (6k - in some RRSP and TFSA but not much).

We are about to receive a windfall of about 800k and are a little flustered at what to do with ALL of it. There is a string attached to the money, it is:

Property must be purchased in the lower Mainland. (Vancouver/Burnaby/Richmond) This property is for investment but also for the possiblity for future living - it will be rented out the first 3 to 5 years and after we plan to move to Vancouver/Lower Mainland. It is flexible whether we decide to keep that original property or sell and find a new place once we move. We are thinking of a 2 bdrm. townhouse or condo and we think it will cost us between $400,000 - $600,000.

With the remainder of the money, (about $300,000) we were thinking of purchasing another property in Alberta (where we currently reside) to live in while working. This would help us avoid renting BUT, (this is where I am unsure) I think it might be better for us to put a down payment of, say, 20% ($60,000) get a mortgage and invest the other $250,000. We can use the rental income from the Vancouver property to pay off the Alberta mortgage. On the other hand, we can just purchase the property in Alberta and sell it when we decide to move to B.C.

If we do invest, what types of investments should we be looking at? I have done a little of my own investing, but not with nearly this much money. I mostly invested in low-cost index funds and ETFs with my RRSP and TFSA. We are pretty risk tolerant and are young, would be nice to grow that 250k into a nest egg for the future.

I hope I covered everything. What would you do with the money?

Looking forward to everyone's replies. Thanks.
 

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I think buying two houses would over-expose you to real estate risk. Too bad about being forced to buy a place in the lower mainland. The market there is not sustainable and the risk of a significant correction is probably fairly high. If this is a stipulation of a will or something, maybe you should seek legal advice for any ways to reduce your exposure to that market.

Same also goes for Alberta, so I don't think I'd recommend buying real estate there.

I think I'd recommend investing the remainder in an equity portfolio, in which case there is plenty of portfolio allocation advice around here. You should also make a plan to maximize your use of RRSP and TSFA room.


And lastly: congrats on your good fortune.
 

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I came into a windfall of similar portion a few years ago. Becoming debt free was number one which meant paying of the mortgage, a small mountain of debt, etc. Then I started to invest the remainder. In hindsight, I should have parked it in a high interest savings accounts or GIC ladders until I learned more, then started to invest. One thought is a GIC ladder of the remainder as it the GICs pay out, put it in a couch potato portfolio if you don't want to be too active of an investor.
 

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It seems pretty cut and dried. The Strings make you buy property you buy property.

There will always be customers for rental in Van. and any down turn in Alberta will temporary. Buy the most salable property's and get on with life.
 

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First, congratulations on your windfall. Obviously, you're thinking about this windfall carefully. Handled well, this sum could help you enormously, especially as you're receiving it so early.

The no brainers: eliminate your debts; buy an inexpensive property in BC since it's required; establish an emergency fund (6 months); invest whatever you can within RRSPs and TFSAs. You'll have the happy misfortune of having more money to invest than registered room to put it in, so you'll likely need non-registered accounts as well.

I'm not as optimistic about real estate as some of the others. I would advise buying a property that you like enough to live in once you move to BC (but don't go crazy). Buying a rental property then selling to buy another one is awfully wasteful; the legal fees, real estate commissions, title fees can be thousands. I'd advise against buying a property in AB. I have no idea what AB real estate will do in the next few years, but if you're only going to be there a few years, it makes no sense to buy. You may as well rent until you move to BC.

Some of the do-it-yourselfers will be shocked, but if you're not sure how to handle the money, why not hire a fee-only financial planner to devise an investment plan for you?

Finally, why not enjoy your good fortune? I saw a program about people who received sudden windfalls. One piece of advice I agreed with was using a small bit of the windfall to do something special and memorable. That way people don't overspend even more later because they feel, subconsciously, deprived. Don't go crazy, but there's nothing wrong with spending a few thousand to take that trip through Europe that you always wanted (or something similar).

Good luck!
 

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Congrats on the $800K windfall!

What do you do for a living? If your happy and comfortable where you are job/career wise then invest in traditional means like real estate, saving's, RRSP's, GIC's etc.

However, I know for a fact that the real estate market in the Lower Mainland and the prices have soared in recent years and months so I would be reluctant to purchase two properties in the west and invest a big sum in the same ''basket''.

Coming back to the job and career question I had, try to invest in a business that will help you generate more wealth, you can get into a franchise for $200,000.00 to $350,000.00 or even take $500,000.00 and become an investor in smaller properties like condo's or older houses and flip them.

Personally, my advice to you is to purchase your house and invest in a business to generate more wealth!
 

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You should buy a minimal property in BC that will cashflow on rental. Keep it under the average purchase price for the region and you should minimize any downside risks. When you eventually move there, whether to keep this rental property will be a separate decision.
 

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The mortgage interest on your rental property is deductible while your principal is not. Therefore you should structure your mortgages to take advantage of this. Question, would you plan to sell the AB property upon your move or then keep that one as a rental property? Do you envision this as a long term investment?
 

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Overall, I agree that you shouldn't rush to invest it. There's nothing wrong with keeping a substantial portion of it in GICs or savings accounts in the short term until you learn more.
 

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I definitely agree with the idea that you should first park your money into a high interest savings account/laddered GICs. That would be step 1. Then buy something with the least chance of depreciating in the lower mainland. I would rent for at least another year before going into the real estate market in Alberta for your own home. Some areas in Alberta have already depreciated significantly, but the pain isn't over yet so wait and see.
 
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