Jasper (36) and Ben (37) have come to see you to get their financial world in order. They recently moved into their new condo in downtown Calgary and want to make sure they have considered all of their financial angles. Their condo is worth $585,000. They have a home equity line of credit on the property with a limit of $351,000 and currently owe $60,000 against it. The minimum payments are interest only, with the current interest rate at 3%, however they usually pay $2000 a month on it. In addition they pay condo fees of $500/month, property taxes of $265/month and heating of $90/month. They split all of their payments equally. Jasper and Ben are in the process of adopting a child (3) from Ethiopia, and want to make sure that they are taking care of everything to set up the best life for her. They will be heading to Ethiopia in 5 months to meet their new child, spend time understanding where she is coming from, getting her used to them, and then bringing her home. This will be a ten week process and means that for ten weeks they will be away from their business. It also means there will be expenses to get to Ethiopia and stay there for the ten weeks. The cost for travel and accommodations will be approximately $15,000. Jasper and Ben own a local boutique public relations firm. They deal with crisis management, publicity, and campaign strategies for politicians. They have four full-time employees working for them that will run the business in their absence. The business is six years old and has seen significant growth over the last three years. Each of them take a $100,000 income (before taxes) from the business on an annual basis. Jasper received a trust fund when he was 25 from his grandparents. The fund was worth $300,000. He took the money to help buy his condo at the time and invested $100,000. That $100,000 is invested in a non-registered discount brokerage account split evenly between a balanced growth fund, an aggressive growth fund, an equity mutual fund, and a fixed income mutual fund. Many of these funds hold the same underlying securities. The fund is currently worth $125,000. Ben grew up wealthy. His parents sent him to private school and he wishes to send their new daughter to the same private school. The cost of the school is $25,000/year and starts when the child is 5. When he went to university his parents paid for the entire program, making it so he never had any debt from university, and they helped him buy his first condo when he was 22, allowing him to keep his debt down. Additional Financial Information: Ben drives a BMW SUV that is worth $54,000, he has no loan on this vehicle. Jasper drives a Mercedes sedan worth $48,000, there is no loan on this vehicle. While both Ben and Jasper have credit cards neither of them carry a balance on the cards, instead opting to pay them out completely every month. This has allowed for both Ben and Jasper to save good sums of money. This has been an important factor through the adoption process as they are required to show financial stability through the process. They have been waiting for six years for this process, and cant wait to go and pick up their new daughter. Both Ben and Jasper have been putting money into both a savings account and RRSP every month. Each of them put $5000 into their RRSP and their Savings accounts each year. Bens RRSP is invested in an

aggressive growth mutual fund, and Jaspers RRSP is invested in a bond fund. While they have been investing, they have no idea how much they need to be putting away. They would like to retire when they are 55, and anticipate this will include a sellout of their business, but dont want to count on that, and would rather ensure they have sufficient funds to retire. They anticipate they will need about 70% of their current income to live off in retirement. Both of them have carry forward room for their RRSPs. They have brought in their Notice of Assessments and you have noted that Ben can place up to $56,000 into RRSPs and Jasper can place $63,000. Neither Ben nor Jasper have wills or life insurance.

Ben and Jasper both sold their own properties when they moved in together, however, they are looking to purchase an income property. They are looking at purchasing an apartment building in the north east side of the city. The building will cost $1.2 million to purchase and they are planning on doing upgrades to the property totaling $300,000. They are able to get a multi-unit residential mortgage from your financial institution at a rate of 5.25% over a 20 year amortization, with payments of $6503.58/month. The monthly (gross) income expected to be generated from the 9 unit apartment building is expected to be $15,500. Along with the mortgage payment monthly, they will have payments of approximately $810/month in heating, $1000/month in property taxes, $1000/month in property management and maintenance fees, and $1000 on insurance. While this property investment will generate additional income for the couple, they are anticipating that this is going to have an impact on their taxes and they are looking for some advice on what to do to mitigate some of these tax issues. The deal will require that they come up with $525,000 for a down payment equaling 35% of the new property plus improvements. This deal is to close in two months.

Required

Compute TDSR and GDSR if they are qualified

They need some help in figuring out the best way to come up with the down payment as well as other things they should consider, including how to best invest the earnings from the property while ensuring they are keeping funds for any issues that might arise in the property.

ssets Jasper Ben Joint Non-Registered Assets Chequing $ 2,500.00 $ 6,800.00 Savings $ 50,000.00 $ 73,000.00 Discount Brokerage (self- investment account) $ 125,000.00 Total Non-Registered Assets $ 177,500.00 $ 79,800.00 Registered Assets TFSA RESP RRSP $ 175,000.00 $ 190,000.00 Total Registered Assets $ 175,000.00 $ 190,000.00 Personal Assets Home $ 585,000.00 Automobile $ 48,000.00 $ 54,000.00 Total Personal Assets $ 48,000.00 $ 54,000.00 $ 585,000.00 Total Assets $ 405,500.00 $ 323,800.00 Liabilities HELOC $ 60,000.00 Credit Cards Car loan Line of Credit Total Liabilities $ 60,000.00 Net Worth $ 405,500.00 $ 323,800.00 $ 525,000.00

Income/Expenses/Savings Joint Net Income (ANNUAL) Ben $ 70,500.00 Jasper $ 70,500.00 TOTAL NET INCOME $ 141,000.00 Expenses HELOC Payments $ 24,000.00 Property Taxes $ 3,180.00 Condo Fees $ 6,000.00 Groceries $ 3,000.00 Power bill $ 1,200.00 Heat $ 1,080.00 Internet, TV, Phone, Cells $ 1,500.00 Personal $ 2,400.00 Entertainment $ 6,500.00 Clothing $ 6,500.00 Miscellaneous $ 10,000.00 TOTAL EXPENSES $ 65,360.00 NET AVAILABLE FOR SAVINGS $ 75,640.00 Savings RRSP Contributions (Ben) $ 5,000.00 Savings Contributions Non-Registered (Bed) $ 5,000.00 RRSP Contributions (Jasper) $ 5,000.00 Savings Contributions Non-Registered (Jasper) $ 5,000.00 TOTAL SAVINGS $ 20,000.00 UNALLOCATED CASH FLOW $ 55,640.00