"Okay Brad, we're looking for the try to look like a badass but really look like a douche look."

“Okay Brad, we’re looking for the try to look like a badass but really look like a douche look. Can you pull that off?”

Anyone from Toronto is familiar with Brad J. Lamb (the “j” stands for jacka- you know what? Never mind), the owner of Brad J. Lamb Realty, because we all know guys like Brad always name companies after themselves. Lamb’s brokerage is one of the leaders in Toronto’s inner-city condo market, his agents have moved more than $1 billion worth of condos. He was also featured in a reality TV show called Big City Broker, which was mostly just an excuse for Brad to brag about how many condos everyone in his office sold.

Lamb isn’t on TV so often anymore – aside from the odd appearance whenever some news show needs an unapologetic shill – but he’s taken his schtick to the interwebs. He started a blog because if there’s anything the world needs, it’s another blowhard with strong opinions on a blog.

Recently Lamb decided he was going to take a few shots at respected finance columnist Rob Carrick of the Globe and Mail. The piece, titled Rob Carrick Is Wrong, has a few objections with Carrick’s advice to a recent university grad, which told him to rent a place instead of buying one.

Take it away, big bad Brad.

I read the Globe and Mail every day, and that always includes the business section.  Rob Carrick is a business reporter for the Globe and Mail, but really more of an advice columnist than anything else.  Generally speaking, I’m in the camp of listening to those who have achieved great things.  When I get a call from a broker or money manager eager to bring me into their stewardship, the first question I always ask is, “what is your net worth?”

Oh God. Not that Lamb needs any further confirmation that he’s a douchebag, but that’s such classic asshole behavior. It doesn’t matter if someone is competent at their job. All that matters is the wealth they’ve created. Does he do the same thing when he hires a plumber? Gets a coffee? Somehow I doubt it.

Also, what’s stopping someone selling Lamb financial advice to just lie? I would have no problem lying to Brad Lamb.

Why would I risk any money with someone that can’t manage their own finances well enough to become wealthy?

Now, I don’t know Rob Carrick, but based on his advice, I’d venture to guess that he’s not wealthy. 

Rob Carrick works at a newspaper. This is not known to be a well paying career, especially these days. If Rob isn’t wealthy, I’m guessing that has a lot to do with it.

But who cares? His advice is really well thought out and presented with evidence. I don’t think I’ve ever read a column by the guy and really objected with his conclusions. When it comes to Carrick talking about real estate, it’s backed up by actual numbers that explicitly state it’s cheaper to rent.

One of his latest articles dealt with a “very intelligent” young man that was seriously questioning the logic in buying a home.  Rather, he is leaning towards renting instead of buying.  This of course leads Mr. Carrick to conclude that he is a very smart young university graduate.  I completely disagree.  I will tell you of a very smart young graduate, one of my nephews.

“I will tell you about someone who I think is awesome. He is related to me. No, it doesn’t matter that he’s related to me. Why would it?”

Through high school, he worked at a fast food chain every hour he could.  He became a shift manager during those years of high school.  He managed to save $40,000 over 6 years of part-time work.  Prior to his first year at the University of Guelph, he bought a brand new 4-bedroom townhouse in Guelph.

Brad’s nephew either took 6 years to get through high school or he started working when he was 12. I’m really hoping it was the first thing.

My brother co-signed the mortgage.

He didn’t co-sign the mortgage. No 18 year-old university student in the country can get a mortgage, even with a co-signer. His dad got the mortgage, and the bank threw junior’s name on it because they were in on the plan. Notice how Brad fails to point this out?

My nephew lives in the house and rents 3 rooms.  His mortgage is covered by the rent from his 3 tenants.  Every year he will pay off $7000 of his mortgage thanks to his “super smart” tenants.  When he graduates after 4 years, he will have paid off $30,000 of the mortgage and this house will be worth $40,000 more than he paid for it.  He will graduate at 24 years old with a degree and $105,000 in his pocket, and he lived rent free!  That is a smart kid.

This “smart” kid is taking a whole bunch of risk. Assuming the mortgage is $400,000 (admittedly, I have no idea what a four bedroom in Guelph will set you back), a 10% reduction in prices will wipe out his entire net worth. A 20% decline in prices will not only wipe out his entire net worth, but he’ll lose his entire net worth again. He’ll also be stuck in Guelph for a long time, and if there’s one thing you can say about university kids, is that they’re 100% likely to end up in the same city where they went to school.

What’s that? House prices don’t go down? Sure they do. You just don’t remember.

Mr. Carrick and his moronic bunch that sing the praises of renting over buying got dropped on their heads as babies.

Duh, what? I no do writing good becuz me head hit ground as BABY.

Who’s the dumb one Brad? The one who relentlessly pimps his business or the people who actually look at and analyze numbers?

From 1980 to 2010, virtually every large Canadian city saw its average real estate prices rise by 5 ½ – 6% a year compounded.  A Toronto home buyer that bought a home in 1980 for $100,000, with $5000 down, in 2014 now has a home worth $500,000.

July 26th, 2000 – Investors should invest in Nortel Networks, the high flying technology company! An investment of just $5000 25 years ago is worth more than $590,000 today! You can’t argue with those kind of results!

Brad Lamb, 14 years ago. Probably.

His $5000 down payment has now risen to a $500,000 windfall.  For those of you bad at math, that is 100 times more that the down payment, or a 10,000% return on invested money.

Dammit, I hate it when real estate shills do this. It’s not a 10,000% return on a 5% down payment. That original mortgage still has to be paid back.

Not only that, but if you base a real estate return on just the down payment, that’s when you get lunacy of 4% cap rates looking attractive. By basing the return on cash paid for the whole thing, real estate investors build themselves in a margin of safety. Not that Lamb cares about that, but still.

Rob Carrick regularly talks about his recommended method of achieving 5-6% per year in annual return on invested money through mutual funds or other stock market investments. 

Well first of all, the historical return of the stock return is closer to 10%. Hell, between 1980 and now, the TSX Composite is up more than 15% annually. Meaning, if an investor had put $5000 into Toronto’s stock exchange back then and forgot about it until now, it would be worth almost $600,000. They would have done better than Lamb’s fantasy, and they wouldn’t have had to take on the added risk of leverage.

Imagine if it was possible to take $5,000 and use it to borrow $100,000 to invest in the stock market, just like the leverage you’d use to buy a house. If you would have done it in 1980 just like the awesome house buyer in the example, you’d have more than $11 million.

That’s a return on your original $5,000 of… carry the one… A CRAPLOAD.

The funny part is he quotes Carrick’s returns going forward at 5-6%, exactly what people got after the greatest 30 year bull run in real estate’s history. In other words, the best case scenario for real estate is pretty much exactly the same as the worst case scenario with stocks.

Oh, and Canadians couldn’t even buy a house with 5% down until the 1990s. So yeah, there are a few things wrong with that piece of advice.

Even Rob’s own newspaper publishes a Saturday segment in the Report on Business section about a couple looking to retire.  Every single one of these couples has 60-70% of their worth in their home.  Why?  It is because it’s the best place for the money to be and the best place for them to make money TAX FREE.

Or maybe it’s because a lot of people have the majority of their net worth in their house because they’re really crappy at saving? Or because guys like you keep telling them how awesome home ownership is, never factoring in costs like maintenance or taxes or insurance?

That’s probably enough. Seriously though, Brad Lamb should die in a fire. Don’t take your real estate from advice from guys who make their living selling and developing the stuff.

 

 

Tell everyone, yo!