Why Houses Are a Scam

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FIRECracker

FIRECracker is Canada's youngest retiree. She used to live in one of the most expensive cities in Canada, but instead of drowning in debt, she rejected home ownership. What resulted was a 7-figure portfolio, which has allowed her and her husband to retire at 31 and travel the world. Their story has been featured on CBC, the Huffington Post, CNBC, BNN, Business Insider, and Yahoo Finance. To date, it is the most shared story in CBC history and their viral video on CBC's On the Money has garnered 4.5 Million views.
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photo credit: Raphael Love@Flickr. License: CC BY 2.0

I had a major case of déjà vu this weekend.

I visited two friends whom I hadn’t seen for years. And like so many of our other peers, they had two things in common:

  • They own property
  • They are stressed out of their minds

One of them has two rental properties (which he supports on one person’s income), and just bought a third.

The other one owns one house in the suburbs and just bought another condo downtown. Her condo fees are $700/month…just $100 shy of our rent when we lived in Toronto.

While we chatted over Korean BBQ and Soju, I had a glimpse of my old life. As I listened to my friend, Ellie, complain about her mortgage and long, stressful work days I saw my ghost. The ghost of FIRECracker’s past.

Ghost Me stared back, eyes rimmed with dark circles, dreading the upcoming Monday, when she’d have to get back on the treadmill, toss back a couple of Xanaxes, and continue worrying about her life slipping away.

Looking at Ellie, and seeing Ghost FIRECracker, it dawned on me how close I’d been to trapping myself in that life. A life I didn’t want, all because of FOMO (Fear of Missing Out).

Ghost FIRECracker had gotten the high paying job, endured the long stressful hours, and almost….almost bought the overpriced house. After all, all my friends were jumping into the market. What if I was missing out and would never be able to buy?

But luckily, I thought about FOMO in a different way. Instead I thought about FOMO like this:

  • What if I was missing out on a life that I could CHOOSE rather than one dictated by the Boomers?
  • What if I have a child and I miss out on their childhood because I’m too busy running the rat race and struggling to pay off my massive mortgage?
  • What if I get ill and die before I make it to 65? What would be the point of my life?
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photo credit: methodshop.com @ Flickr. License: CC BY-SA 2.0

But clearly Ellie didn’t see it that way.

When I asked her why she won’t sell her place and rent instead, she laughed. A derisive laugh.

“I can’t go back to renting!” She said. “I’ll miss out on all the investment gains!”

“And besides, if you have kids one day, you’ll want to grow some roots. “

I get it. The nesting instinct and FOMO are two of the main reasons why a homeowner would never go back to renting. Especially since their friends can’t stop bragging about the windfall they’ve made in the market.

Here’s the thing though. Those friends are filthy LIARS. Why? Because until they sell the house, they won’t make a single cent. And most people won’t sell and go back to renting. They’ll be too emotionally attached to the house and their identity as homeowners. So they will either keep the house or buy a bigger house. And then the cycle continues. And in 20 years, they’ll wonder where their life went. They’ll wonder why they didn’t get to spend time with their kids because they were too busy working. And now their kids are all grown up and they’ve missed the best years of their lives.

Home ownership has now become a cult in North America (In France and Germany, most people just rent). But it wasn’t always this way.

So how did it happen? How did we become so obsessed with home ownership?

Did we get scammed? Tricked into believing owning a home is the ultimate dream when, in reality, it’s a nightmare?

Yes and yes. Houses absolutely are a scam, and here’s why:

1. The Conservative Government Popularized Home Ownership 

Traditionally, houses were a way for Conservative governments (specifically Reagan in the US and Thatcher in the UK) to secure more taxes and stimulate the construction industry.

After all, if you’re a homeowner, you have to pay property taxes. And if you’re stuck, worried about your property values, you’re more likely NOT to vote for change.

2. Property Tax is a Wealth Tax

When you own property, you have to pay property taxes no matter where you live. And you have no control over those taxes.

But when you invest, you actually pay FEWER taxes than the average working stiff. If the government ever introduced a wealth tax, people would immediate sell their stocks/bonds and move their money to another country. But you can’t do that with a house. If property taxes get out of control, you can try to sell the house, but then you incur closing costs and, oh by way, everyone ELSE would be trying to sell, so your house would be sitting on the market as supply overwhelms demand.

3. Speculators are willing to rent at a loss, to go after the capital appreciation

According to the Financial Post, “Ben Myers, vice-president of Urbanation, agrees that many investors in the GTA are not cash-flow positive on properties, taking the loss because they’ll make money on the underlying condominium.”

That’s not investing, that’s gambling. This is what’s driving up the prices. Not foreign investors. And once the cheap debt stops, the real-estate party will too, which brings me to my next point…

4. Interest Rates Are Determined by the Bond Market, not the Bank of Canada

Here’s probably a phrase you’ve heard before: “The Bank of Canada will never raise interest rates, so housing prices can never go down.”

This is a misconception on how interest rates work. Interest rates are determined by the global bond market, not your own government.

Our interest rates are pegged to the US’s. So even if the Bank of Canada doesn’t raise interest rates, if interest rates in the US go up, it can affect our interest rates.

5. Home Inspections Are a Thing of the Past

With the Toronto housing market so insane, people are forgoing house inspections. Inspectors are finding all sorts of problems (termites, mold, structural issues), after the papers have already been signed. This can cause thousands of dollars in unexpected costs, and unsuspecting homebuyers will be left holding the bag.

 6. Houses prices have gone up, but salaries are stagnant.

“Vancouver’s price-to-income ratio is 11.2, while Toronto’s is 8.2”.

Back in our Boomer’s parent’s era, the price-to-income ratio was a measly 2 or 3.

“With an average price of $627,395 in the Greater Toronto Area, a household would need income of at least $209,000 or so to be in sync with the guideline of having a price-to-income ratio around three”.

Which is insane, since the avg family income in the GTA is only $75,000—nowhere NEAR $209K.

We wanted to buy a house back in 2011. But once we stumbled into Financial Independence, we realized that having a portfolio that PAYS you passive income to travel the world is WAY better than having a house that constantly costs you money (insurance, maintenance, property tax,etc).

But nobody understands this. So they keep asking, “if we don’t buy a house, what’s the alternative? Invest? That can’t be safe? The only other “safe” option is sticking our money in a savings account, earning 1.5%. That doesn’t sound very sexy.”

And no, no it’s not. And it doesn’t make sense either. Because what FEELS safe isn’t really safe at all.

Tigertemple
Photo credit: Dmitri1999 @ en.wikipedia

Our parents keep telling us to buy houses, because it’s the only investment they understand. Because it feels “safe”. And the only alternative is putting your money in a savings account.

Why do we think this way? Because they never taught us about investing in schools. In fact, when I graduated high school, I knew more about soil erosion than ETFs. What is up with that!?

No one tells you that when you lock your money away in a savings account paying 1.5%, you are actually LOSING money to inflation. Since interest is taxed at your marginal rate, you are losing between a third and a half of that gain to taxes. So at 0.75%, you aren’t even beating 2% inflation, making your money worth less and less over time.

Compare that to a balanced portfolio, earning an average of 6% year after tax. If you had 100K invested instead of sitting in a savings account for 30 years, the difference would be a staggering $449,222 after taxes! (100,000*(1.06)^30 -100,000*(1.0075)^30).

Equities are a natural hedge against inflation. As prices rise, companies charge more and make higher profits. That profit gets passed to you, the investor, either in the form of dividends or capital gains (as companies become more profitable, they can invest and grow their businesses, increasing the value of their shares). And because investment income is taxed more favourably than interest, you get to keep way more of those investment earnings than the tiny interest paid to you by the bank.

And if you still think investing is too risky, please go and read our investment series, where we explain how to build a balanced, diversified portfolio, using indexing.

And if you still want to include real-estate, consider including Real Estate Investment Trusts (REITs) in your portfolio. That way you can still take advantage of the rising real-estate market, without having to lock all your money in one risky asset. In fact, the REITs in our portfolio went up 22% in the past year…higher than the 16% rise in GTA house prices. Meanwhile we’ve never paid a penny in property taxes or maintenance, and we’ve been getting an income from the rents paid by the tenants in that REIT.

So this is why we invest. Unlike houses that keep sucking money from my friends’ pay-checks, our portfolio pays us, so we no longer need to work. And unlike their houses, we don’t need to pay for broken shingles, or leaky roofs, or flooded basements. And if the value of their house plummets in a down market, they get paid nothing. Our portfolio, in contrast, keeps paying us dividends, even if the capital values drop–like during the 2012 Grexit, Oil crash of 2015, or Brexit.

So, there you have it. Houses are a scam. They suck away your life energy, cause you to lose time with your kids, force you to be chained to your stressful job…and yet people continue buying them. Why?

What are your thoughts on home ownership?



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133 thoughts on “Why Houses Are a Scam”

    1. I’m 60. Please don’t hate me. When I was 19, I worked full time (32-40 hours a week) at Safeway. Payed for my education, lived in a tiny ratty basement suite.
      Attended UBC with a full course load(while working night shift). Sleep deprivation like you can’t imagine.Saved everything I could from age 15 (first job) to 23 (graduation) and bought a house with my older brother in Richmond . That would be equivalent and remote as Maple Ridge or further out today.
      We sold that. I moved to Calgary and bought a crap townhouse with my young pregnant non working wife.
      Took no vacations, bought no car, wore good clothes and ate out twice a month. We stayed on the property ladder. Despite having only a middle class income(packaged goods sales) – I renovated and traded up to an almost paid for house on a big lot in West Vancouver. But I have a sore back, gnarly fingers and divorce behind me. Was a single dad for a while.3 daughters. Just be careful when you see the old grey haired guy in Starbucks with his expensive BMW motorcycle parked on the curb in West Vancouver. Maybe, just maybe, he’s an ok guy. Maybe he took his lumps.

    1. Good question. Here’s my take on it:

      Central banks have been printing money and lowering interest rates, but their intent is to stimulate the economy, not artificially inflate housing prices. So once the economy recovers (as shown by the explosive job growth and salary increases in the States), interest rates will rise. When that happens, people who have taken on massive mortgages are going to see their home prices fall, their monthly payments go up, and they’re going to be wondering why they can’t get ahead. That’s the danger of jumping into the housing market.

      In terms of our portfolio, the stimulus actually helps equities, so we’ve been able to benefit from the gains. Bonds have also increased in value as interest rates go down. In this environment, it makes more sense to invest than to lock your money in a savings account, because not only are interest rates low, they are taxed at the marginal rate, so people are losing money to inflation.

  1. Pretty much completely agree.

    I grew up in Montreal and used to like big cities. But Toronto’s housing market is just insane. I wouldn’t buy property there.

    K-W’s condos are much more affordable, especially when not in the luxury condo market. But I still consider our housing to not be an investment.

    1. Kudos to you for having a clear head. It’s so hard to talk to people about their house because it’s SUCH an emotional topic. And it’s also one of the biggest decisions people will ever make, so I’m surprised they’re are jumping in without crunching the numbers or doing any research. Very scary.

      K-W area is definitely more affordable. If we ever get sick of travelling (which I don’t see happening any time soon), we might consider settling down there. While I favour renting over owning, I’d still crunch the numbers to see which one makes sense. In Toronto, buying makes NO sense anymore.

    2. KW has actually been getting pretty expensive in the last few years. You can still get nice places for a decent price if it’s going to be your home for a long time, but the ROI is terrible if you are an investor (for cash flow, that is). Not sure if it’d be worth if you’ve already FIRE’d and only going to be using your Canadian place for parts of the year. Most of the small towns outside of KW are much more affordable, but most people don’t want to live there.

      1. That’s good to know! In any case, I will do the math and see whether rent beats owning in KW. I have a sneaking suspicion renting will win…but I never rule anything out until I do the math.

  2. Your favorite homeowner here chiming in. The property tax is such a pain in the ass. I wish there was a renter taxes well to make things equal. That way there wouldn’t be so many people voting to raise property taxes without having to pay more taxes themselves for more programs they are unwilling to pay for.

    One of the things that is hard to see until maybe a decade after home ownership is really how powerful inflation is. The first five to maybe 10 years of homeownership requires some sweat equity. But once you make it through the first 10 years, things get much better financially, again thanks to inflation.

    Nothing good comes easy. But if you can ride the wave of inflation through real estate or stocks, chances are you will be financially better off in the long run.

    Sam nothing good comes easy. But if you can ride the wave of inflation through real estate or stocks, chances are you will be financially better off in the long run.

    1. I guess that’s the funnest part of being FI and a renter…voting to raise property taxes so someone else can pay for my social programs. Tee-hee! ^_^

      Seriously though, you choose to ride inflation through real-estate, I choose to ride inflation via equities. We’re not enemies here.

      That being said, I’ve followed your blog for many years and you obviously know what you’re doing. You understand how to use debt, and you understand how to analyze cashflow. Most people don’t, and those are the people getting into >500k mortgages without a clue about what they’re doing. The issue happens when people who aren’t NEARLY as smart as you get into as a similar amount of debt, with zero (or negative) cashflow. Then shit hits the fan. I don’t want to be anywhere near real-estate market when that happens, and it’s already starting in Vancouver…*cue ominous music*

      1. I’m really surprised about how strong the Vancouver real estate market is. I’m in service or, what are the major companies out there hiring like crazy to afford these level of prices? It can’t all be China money Can it?

        Roughly 25% of my net worth is in public equity investments. I guess because I spend my entire career in public equities, I’m not as big of a fan as maybe other people. I know what goes on behind the scenes. I don’t like to be a minority shareholder and companies that pay their CEOs tens of millions of dollars for driving the companies into the ground. I also don’t like exogenous variables blowing up my holdings either.

        1. Vancouver (west side) home owner here. I am with Sam. I have been invested real estate in the area for 46 years, and have seen it rise and fall, but mostly relentlessly climb. Finite supply (water, mountains, border), immigration, demographics (people moving in from other provinces), and now low interest rates keep the prices rising in approx. 7-10 year cycles.
          Locals can afford the expensive houses either because they build equity and move up over the years and/or inherit money from parents who own(ed) houses and/or they own successful businesses.
          Another reason real estate does so well is that the capital gain is 100% tax free on your principal residence.
          A good strategy is to rent part of the house (basement suite, coachhouse) and that covers the mortgage and other housing related expenses (and provides low cost rental housing).
          With the new property purchase tax on foreign buyers, we’ll have to wait and see what happens. Already, listings were way down as people are scared to sell and buy in this market. Now they’ll be more scared. Low inventory will tend to keep the prices up. (BTW, there are still lots of affordable houses and condos in Metro Vancouver as long as you don’t insist on starting at the top.)

      2. I don’t know if it is the same everywhere, but in Quebec property taxes are automatically passed to the tenants when the rental agreement changes (typically every year).

        1. No, as far as I know, we don’t have that in Ontario. It’s possible that the landlord can set the rent higher, to account for their property taxes, but since there are plenty of places for rent in Toronto, the tenant can just pick a place with cheaper rent, like we did.

          1. It’s possible that the landlord can set the rent higher, to account for their property taxes

            Not true for Ontario, with some exceptions. If a tenant stays in the same rental, the allowable yearly rental hike is set by the Province, based on the consumer price index, backward looking. This, of course, is less than real inflation for landlords in recent years since property taxes, water and other ‘sometimes included costs’ such as hydro have been going up well above the rate of inflation.

            However, to balance this, if a tenant moves, the landlord can set the rent at whatever the market will bear for the next tenant. And in recent years, for Toronto at least, that has been MUCH higher the CPI increases.

            I should caveat that there are some exclusions to the above, such as ‘shared accommodation rentals’ with the landlord. I believe that I’ve read that condos are also not covered, but as I don’t own/rent one, don’t quote me on that. 🙂

            1. You make some very good points. The rent hike is set, but high demand could give the landlord the ability to charge more.

              However, that being said, in my experience, because I have a lot of good references and a high credit rating, when we moved, all of the landlords have begged us to stay (offering us all sorts of gifts or lowering our rent). So there is something to be said about being a good tenant and having your pick of rentals 🙂

  3. Well, not ALL houses are bad investments. But the overpriced ones in Toronto and Vancouver are. We’ll do a cost analysis of rent versus own and the opportunity cost of owning a house instead of investing in a future article.

  4. I would say ‘income generating’ real estate is desirable. As long as the property gives you a reasonable yield, and appreciates, I would be inclined to put my money there. Toronto, Vancouver? Bay Area? Nope. Too expensive and rent does not cover mortgage and expense. Negative cash flow is a no no

    At the right time though, you can really have substantial gains. I’m seeing some slowdown here. Sam predicts 2018. I’m also curious about real estate in Calgary.

    1. If you know what you’re doing (ie calculating price-to-rent ratio, cap rates, etc), then investing in real-estate as an income property makes sense. But many people in Toronto blindly jump right in, thinking they’ll make easy money without doing any calculations. That’s the scary part.

      And yes, timing is everything. If you buy and sell at the wrong time, you’re screwed. That’s why I like buy and hold investing better than real-estate investing. You don’t need to time the market.

      So are you in the Bay Area? You mentioned Sam’s predictions, so I’m assuming you guys live in the same city.

      And Calgary real-estate is getting hammered…sales down 12%. This SHOULD be a warning to the rest of Canada, but people in GTA and Vancouver just ignore it and say “meh, it’ll never happen here.”

      1. Sam lives in San Francisco, and I live an hour south of that. Land of the techies. I’ve lived in Toronto, Waterloo,Vancouver as well. Back then believe it or not, I could get a 1+1 at Bay&College st in Toronto for 200k –but too bad I was a poor student back then.

        Foreign investment is pretty heavy in Vancouver, not sure about Toronto. Most of my parent’s neighbors are all cash buyers, so I would think Calgary is a little different because the economy is actually based on people ‘working’. If Calgary continues to be on the downward trend, I’d be interested in foreclosures.

        1. The thing with San Francisco is that every 22-year-old out of college is getting a $100,000 a year job. And when these 22-year-olds become 30 years old they are now making $200-$300,000 a year.

          And when these people get married, they are now making over $400,000 a year.

          My point is that there is a huge job industry that is well pain that is supporting these housing prices. Then you have all this for money coming in buying about 10% of the inventory. Then you have the thousands of employees at uber, Pinterest, Airbnb, who will all be multimillionaires once their companies go public in 2 to 3 years.

          As a result, I think the bay area is relatively cheap. I just don’t understand why Vancouver is so expensive. Someone tell me the answer.

          Thx

          Sam

          1. Sam, you hit the nail on the head. The salaries in the bay area supports its housing prices. The salaries in Vancouver…not so much. The avg family income is only 76K…nowhere NEAR the MULTI-MILLIONS it costs to buy. We have a similar situation in Toronto where income is stagnant but housing prices are through the roof. Everyone is so quick to blame it on foreign money, but research has confirmed foreign buyers make up only 5%. The most likely explanation is cheap debt. Canadians now have a 165% debt-to-income ratio, HIGHER than the 147% debt-to-income ratio that Americans had before 2008. The end is near…

          2. Sam,

            Most SF residents cannot afford to buy a house in SF…think it’s at 11% that can afford (when factoring in downpayment, mortgage, prop tax, insurance, mait/repair, etc).

            My guess is even SF will see a slight drop and then hold steady for many years…just a guess though.

            1. I think San Francisco prices are going to go down about 10% from peak to this recent correction, flatline for a year, and then resume upward after Uber and Airbnb go public by 2018.

              Or public transportation system janitors an electricians make over $250,000 a year here. Now imagine how much people in the tech industry make. It is much, much greater.

              1. that was one guy…obviously not all the janitors make that…and i get it…there are a lot of tech guys making oodles of $$$, but 11% of SF residents can afford the median price right now…so let’s say another few thousand Uber/Airbnb folks become millionaires…still not a sure thing housing goes higher. Since 1990 SF real estate has gone up about 5% (per this website…https://www.neighborhoodscout.com/ca/san-francisco/rates/#data) with the rest of the US at 1-3%. So I do believe that SF housing has and will continue to appreciate faster than the rest of the nation, but I can’t see how it can continue to climb at double digits in the near future.

                1. Actually, there are plenty of janitors will make over $200,000 a year. And then there are the electricians, and the elevator workers, and everybody else who make similar amounts. Literally half the San Francisco employee army makes over $100,000 a year.

                  Where are you getting this 11% figure?

                  Let’s forget about the Airbnb and uber IPOs making 10,000 new millionaires. Think about the tens of thousands of employees who work at Apple, Facebook, Google who also make $200,000 plus a year. It really is an in Normas group of people who are making a lot of money.

                  1. here’s the article…http://sf.curbed.com/2016/2/23/11101182/11-percent-of-households-can-afford-san-francisco-homes

                    you mention all the employees that work at apple, facebook, google, but they are already here…if they haven’t bought yet, why would they buy now or in the near future when we are at all time highs for real estate (and stock market), with interest rates (most likely) about to climb (which will push real estate prices down). buying in SF right now seems absolutely foolish to me right now…(which is why i’m putting my place on the market).

                    what’s your take on the economy and the deficits? we can’t print money forever (obviously)? USA soon will not be able to pay it’s interest on it’s debt and this is with historical low interest rates…what happens when rates go up? 1 out of 3 developed nations have negative interest rates. Trump’s plans for the economy (tax cuts for everyone, esp super rich) don’t appear to cut the deficit (based on most economic/tax agencies).

                    Honestly I don’t know when we’ll correct (or crash), but it just feels like everything is about to bust.

                    To me there seems to be better places to invest that actually cash flow (midwest/south)…relying on appreciation in Bay Area at these prices doesn’t seem wise to me.

                    1. I don’t look at my home as an investment. I just look at it as a home to enjoy life. Just built my deck off my master to finally drink some wine outside and watch the sun set into the ocean (http://www.financialsamurai.com/practice-taking-profits-to-pay-for-a-better-life/). All I’ve ever wanted was to enjoy life more by maximizing the utility of my wealth.

                      Again, I expect prices to come DOWN about 10% from peak to trough. Prices have already come down about 5% here in SF, and w/ interest rates shooting up, marginal demand will decrease and prices will drop further until some new catalysts, namely IPOs.

                      I will NEVER sell any of my rental properties in this still relatively low interest rate environment b/c 1) You should hug your cash cows, not sell them, 2) Commission rates are way too high at 5% – 6% (http://www.financialsamurai.com/what-does-it-cost-to-sell-a-house-a-look-at-the-commissions-taxes-and-fees/).

                      Property is just a simple asset that if held for a long enough time, like most assets with income tend to do well.

                      Sam

        2. Yeah, 200K won’t get you anything in the downtown core anymore. 1+1 at bay&college is around $300K-400K + condo fees. Housing prices have gone up but salaries haven’t. Research done by the government revealed that foreign buyers are only 5% of the market in Vancouver, so I suspect a lot of the prices are being pushed up by cheap debt. Once interest rates rise, the party’s over.

          Calgary is dependent on oil field jobs, so the outlook is not good for housing. You might be able to pick up some good deals (but again, why?)

          1. “that foreign buyers are only 5% of the market in Vancouver,”

            Here’s my question. Does investment immigration permanent resident count as foreign investor? So a family from Asia immigrates with their family to Vancouver, and buys multiple houses, is that foreign investment?
            Or a student who is a PR decides a buy a house with their family money.

            To me, I suspect it’s more than 5%. But like you said, cheap debt, speculation are also driving up the market.

            1. Well, when people immigrate and students get their PR, they are living and working in Canada. They pay their taxes here, so I don’t see the problem with that. I believe the study excludes them. It’s only looking for foreign investors who buy houses to park their cash in, and then leave the place empty. These investment properties cause Canadians to be priced out and inflates the housing prices.

      2. Sales volumes down 12% — does not mean prices are down, but likely they are.
        Real estate prices in Vancouver area do cycle down sometimes, but it’s important not to panic and sell, just like when the stock market goes down. Over time, prices go up. Keep paying the mortgage, and wait out the downturn. Don’t have any non-mortgage debt and make sure your cash inflow (or cash on hand) is much more than your cash outflow, so you can handle higher interest rates, and other ups and downs in income and expenses. Be prepared to cut back, have room-mates or renters, or find side hustles if necessary. I keep my mortgage payments as low as possible just in case.

  5. I’m not on the buy house versus rent side. It really depends on your circumstances and you have to do that rent vs buy calculation. I live in a high cost of living area as well (NYC metro area). If I had the choice between $850 rent which is what you pay or buy a house that is over a half million dollars, the choice is easy. My wife and I were renters for a while (1BR for $1475 to about $1600 with annual increases). When we had a baby, we lived there for another year but wanted a bigger space. Houses were way too expensive so we looked at co-ops (not sure if they have these in Toronto). The mortgage and maintenance on the co-op we bought that we converted to a 2 BR costs about $1900 a month. A similar rental would cost $1800 to $2000 a month so there isn’t much of a savings with renting. And unlike a house, there are rarely repair costs because most of it is covered by the maintenance fee (which includes property taxes)

    1. I think we do have co-ops in Toronto. I don’t have much experience with them though. My understanding is that Cooperative Corporation owns the entire property, not each individual owner, and that’s what makes it different from a condo. So what happens if you want to sell? Do you need to have a vote with the other owners to decide on that? Or does the board decide?

      1. No, you can sell whenever you want, but the buyer has to be approved. Generally, they will approve the sale as long as the buyer’s financials look good. I believe with my co-op there is a 1% transfer fee when you sell.

      2. Indeed we do. Co-op rentals, co-op ownership. There’s even a hybrid on the ‘co-op’…essentially a ‘co-op’ that builds a condo (google OPTIONS for Homes).

          1. Options for Homes built some places in Waterloo, even. I used to own and live in one of them. Was not super-luxurious but worked out for a while.

  6. Being a regular reader of Garth’s blog, I’m particularly interested in the ever balooning Canadian real estate bubble.

    I am also of the opinion that real estate often is a very poor investment.

    However, a home can simultaneously be a poor investment compared to, say, an index mutual fund, and yet buying can still be a better way to pay for living expenses than renting. It comes down to buying four walls and a roof or renting four walls and a roof, and the correct answer is based upon your local market and, generally, your timeframe for living in an area. In less expensive markets, there’s a breakeven point for buying.

    The correct advice is not really “rent” or “buy” but, “do the math”.

    1. Agree. But in Toronto, if I so much as mention “the math”, my friends respond by putting their hands over their ears and yelling “lalalala, not listening, not listening. lalalala.” So yeah. People don’t like math for some reason…

      The housing bubble here is reaching epic levels. In Vancouver, housing sales are down but prices are up…not a good sign. Smart money always leaves the market first, and the masses are left holding the bag.

      We all know a correction is coming, but nobody knows exactly when.

    1. God I hope not. His beard would look terrible on me.

      And Garth is one of a kind; he can’t be duplicated 😉

  7. I’m an older fan…yes, we own our house. OWN. No mortgage. The reason why we bought our house was because we had children…and because my mother in law said so. But we bought at a historically low time in the Toronto real estate market. Would I buy a house now? Not sure. Knowing what I know about the stock market and investing, I would invest then buy a house. People are nuts right now. I love real estate, but I stay far away from it!

    Be free and mobile…see the world. That’s my advice to my own kids.

  8. I live in Vancouver. My suburb where I live with my folks has gone up so much it’s ridiculous. Average price of a normal 4 bedroom, 2000 ft home is $1.5-1.8 million.
    Had a good friend who bought 10 years ago 2 streets down for $700k and we thought that was crazy back then. Basically it’s been a bubble from 2000 to now, with a few hiccups.

    Price to income ratio makes absolutely no sense. I mean, Seattle which is 2 hours south and basically the same living standard is 2-3x cheaper! And what that guy from San Franc said is right. down there salaries support the prices. Here no fresh grad is making 100k, let alone 50K! unless they are in IT or engineering, or oil&gas..

    Crazy times.

  9. http://www.greaterfool.ca/2016/07/26/the-crash-tax-crash-test/

    I just been reading Garth Turner’s blog today. This whole housing thing is very confusing to me…
    If what the government reports that Garth Turner has been posting are true, foreign buyers are at about 5-10% of the total market share depending on what data you look at. House ownership in canada is about 70% (I think Garth mentioned this but I haven’t confirmed it myself). If we assume foreign money is the major force artificially inflating the canadian housing market, by that logic, lots of canadians (in fact, 70% of them) are getting a huge boost to their net worth (i.e. making lots of money without having done anything).

    If all of the above assumptions are true, then any regulations to control foreign money coming into the canadian housing market will negatively impact the price of housing.
    My questions are:

    1. Why are most people even upset about the foreign money (seeing that 70% of Canadian basically won the lottery for having bought a house, especially since these foreigners basically give Canada free capital and don’t get to use any of our services like healthcare/social security/CPP)? Sell the house when they retire and live a fabulous live on the untaxed gains seems great to me.

    2. Why do most people think restrictions like the foreign property tax is good for Canadians (seeing that if the prices fall, Canadians will have less capital gains or even lose money if they bought in the last few years)? I mean, this is obviously good for people like me because I rent, I just don’t see how it’s good for the 70% people who already own a house???

    1. 1) Canadians who are being priced out of the housing market are pissed off. And since they’re the loudest and angriest, they’re the ones pressuring the gov’t to make housing more affordable. While I see your point about foreign investments giving Canadian more capital, this is not necessarily a good thing. With no control over the flow of this capital, our housing prices get very inflated (since they are not supported by fundamentals like higher salaries) and are at risk of having an uncontrolled collapse. This is why the gov’t has been so hesitant to bring in any measure to cool the market (for fear of exactly this), but at this point, the market is so overheated, they have no choice. Either deflate it carefully, or have it crash HARD.

      2) This is why the gov’t has been hesitant to make any changes. I think at this point, they don’t really have a choice. There’s too much pressure from Canadians who can no longer afford to live in Vancouver, and from the heated housing market that would sustain a massive, uncontrolled collapse if the government doesn’t take measures to carefully deflate it. That being said, if the real reason the housing market is so heated is because of high-levels of Canadian debt, and NOT foreign buyers, the tax won’t have much impact. If, however, most of the houses ARE being bought by foreigners, the housing market could very well crash. This fear is what’s keeping the Ontario government from doing the same thing.

  10. People may think you hit the lottery buying a house in Vancouver 20 or 30 years ago, but reality is it’s a paper profit until you sell. And most parents won’t sell, I mean my folks will probably live here for the rest of their lives. Unless you plan to take the cash and move to a cheaper city or downsize it’s not worth selling.

    Then you got the young people paying $400-500k for a basic 2 bed condo. For the price of a 1 bed condo, $300k+, you could buy a house in half the cities in USA!

    1. Yup. Most people won’t sell or they’ll sell and get into even more debt. That’s why a house is dead equity. You work your entire life for it, and never get a penny out of it until you die. At which point, who cares?

      1. Just to add another point of view about real estate in Vancouver.
        It might be dead or inaccessible equity (although growing at a good rate especially if the investment is heavily levered), but the feeling of security it brings is wonderful. It means I can take a bit more risk on other investments. It is also a potential source of income as I can also rent the house or part of the house. And it’s all tax-free gains when you sell.
        I submit that houses are as affordable as they were when I started in the late 1960’s — you can’t start out on the west side of Vancouver, but you can start out further out in the valley. That’s how we did it back then. My first property cost 5 times our combined (non-professional) income. I believe you can buy a house not much further out now with the same relative income to price.
        I also know very smart hard working young couples in their 20’s buying houses and rental property on the east side of Vancouver.

  11. I have been reading your posts and see some valid points. Real estate is all about timing. I have been fortunate to have timed it right…. twice. I am also retired, although at 50. The last sale being during this latest surge in Vancouver where I was able to add another million to the portfolio, thanks to a greater fool.

    A good part of my financial freedom also came from saving which (it appears) is the foundation of your strategy. I have always lived well within my means. Another lesson lost on the pay cheque to pay cheque generation.

    Herein lies the problem as I see it. 99% of the people can’t save. Thus creating… the 1%

    People today cannot save money. They either were not taught how, by their parents, or, they had it too good growing up and never had to.

    I applaud your efforts and wish you success. In todays world, your theory is a good one and possibly the only one to get people through to the “next round” Good luck.

    1. Thank you! Sadly, I believe the financial institutions are keeping financial education out of schools to keep everyone ignorant. That’s why I knew more about soil erosion than ETFs when I graduated high-school. And that’s why I started this blog. I firmly believe that everyone has a right to financial literacy, and that’s why I want to share as much information as possible. No one deserves to be screwed by the realtors or Wall Street/Bay Street.

      1. I certainly would have loved to have family that taught me about personal finance, investing, and business. I definitely agree that schools should teach how to apply math to financial situations and create financial spreadsheets — valuable tools for decision making. I had to learn about investing on my own like most people learn most things. Even the conventional financial wisdom that is provided by the financial advisors and money managers isn’t always so great. Luckily there are many great sources of information for people willing to read a few books and blogs.

      2. Hmm, perhaps your experience was different than mine. I grew up in Toronto. I remember learning compound interest in early high school (had to do it long hand – no calculators! – and everything). I’m guessing that the difference is really more:
        – most of my classmates didn’t see any ‘real world applicability’ to the exercise like I did (interest rates were high then…I remember freaking friends out by shopping newspaper ads for the highest GIC returns);
        – media/advertising does a great ‘sales job’ on how you really don’t know anything after all and therefore need a financial expert to hold your hand.

        1. I agree. I think the little bit of “financial education” we had in school wasn’t applicable to the real world.

          How cool as it that you knew about GICs at that age! Guess you were always a financial nerd 🙂

    2. Yes, many people are not very good at seeing more than a few steps ahead and can’t see that a little discipline can result in huge benefits quite quickly.

      It’s not only young people. I know retired professionals who with a pension, a house or condo, and a portfolio, but can’t see ahead to the years when the money they have now won’t seem nearly as much. They “hate” dealing with money and finances (too stressful). This is not even talking about the ones who are really terrible with money and basically p…d away their savings and house equity (sold too soon and became renters), and have probably another 20 years to eke out small pensions. Emotional reasons (impulsively selling real estate at the wrong time), fear (stock market is gambling), YOLO, and other excuses for poor judgement.

      That’s why I really admire FireCracker and Wanderer. You can see ahead of yourselves and you know yourselves. You got smart long before I did.

      1. This was addressed to Oliver’s comments. I’ve got to get the hang of how to address other’s comments.

  12. I don’t know, all of this isn’t one size fits all. We don’t live in a major city. We are Gen X (’72 and ’78).. so maybe I don’t get it. We bought in 2004. Our house is 2.5x our income. Local rentals cost more. Locally the rental market is tough. When I hear about people having to give up their beloved pets to rent, I’m happy that we bought. When I hear the recent stories about families needing to live in tents because they were renovicted and can’t find a rental, I’m happy we bought. Our house doesn’t stress us out, hell it’s not far off from being paid for. We have a house emergency fund in case something happens. We can still save outside of the mortgage.

    I have absolutely zero desire to travel to most third world countries. For the countries that we do want to visit, we can still travel to them even before retiring. Our child is the biggest expense (our house isn’t). As for him I don’t feel like I’m wasting his childhood because we still spend a lot of quality time together. He’s 4 and he loves his daycare friends. By the time he’s in school it will only be a few hours on weekdays we won’t watch him grow up outside of (important and legally required) schooling.

    We also couldn’t have saved up $500,000 by the time we hit 30. I left my parents house at 19 and paid for all expenses by myself. It just couldn’t have happened.

  13. Also, my sister and brother in law bought their house 5 years ago. My brother in law LOVES doing the renovations to it and making it his own. They both are working at their dream jobs. They are quite frugal because they prefer to be. I’ve never heard them complain about their mortgage.

  14. I absolutely agree that it would be crazy to buy in Vancouver or Toronto. But home ownership can be a big gain in some cities, particularly deindustrialized US cities that give financial incentives for homeownership because they have WAY too many houses.

    For example, I got a $7500 USD first-time homebuyer’s grant to go toward closing costs and my down payment, and that covered ALL closing costs. All my money went directly to equity. I have to live in the house for 5 years, but my parents live near here and I can’t imagine leaving since they aren’t young and aren’t in good health, and I will never be able to get the time back with them, if I moved to make more money. It’s not worth for me it if I lose the time (the only time that there will ever be) with my parents. Plus I hate moving.

    Additionally, there are rehab/reno grants. If I put $5,000-10,000 towards renos, there is a grant that will match it, paid off 20% each year I live in the house, for 5 years. What else has such a high rate of return? Of course this only is realized once I sell, but I definitely plan to sell once my parents are no longer here.

    I bought the house from my landlord, so no realtor fees, and my mortgage (including property taxes etc., homeowners insurance) is lower than my rent, which I was paying to live in the same house. Other people I know have also bought their houses from their landlords, and in my state, the landlord legally has to offer the tenant the right of first refusal before selling it to someone else.

    I could also rent it out for $400 more than my mortgage a month, if I ever wanted to leave, and with repairs, maintenance and even paying a management company, it would be really hard to do worse than breaking even and would likely provide passive income.

    tl;dr Homeownership might be worth it if you live in a mid-sized deindustrialized city in the US, and don’t like to move.

    1. Additionally, if I broke up with my girlfriend, instead of splitting the mortgage, I could get two roommates to fill the extra two bedrooms, and that would completely cover my mortgage, which is a great option to have if times ever get hard (disability or longterm illness).

  15. You had mentioned earlier that “Since interest is taxed at the highest rate, you are losing half of that gain to taxes. So at 0.75%, you aren’t even beating 2% inflation, making your money worth less and less over time.”. However, don’t they gat taxed at the marginal tax rate ( your tax bracket)?

    1. Correct, I meant “YOUR highest tax rate,” not “THE highest tax rate.” I’ve corrected the original article. Nice catch!

  16. Love this post, exactly why we’re trying not to buy into the property scam right now.

    Biggest downfall of renting so far though, is being kicked out when the owner wants to sell because of rising house prices :/ That’s happening to us now so we’re busy rental hunting again. If I could find a cheap housing solution I’d buy just for the security of not worrying about being moved out.

    Tenancy contracts in New Zealand are pretty short – usually 1 year or so – and after that year expires you can either renegotiate another contract or go on a month-by-month basis. 1 month notice either way, and you’re out 🙁 I’ve had friends kicked out because landlords wanted to move into the house, sell the house, move family back in etc.

    It’s a bit of a sellers market *and* a landlord’s market right now, with a high shortage of suitable housing, especially in Auckland. Hopefully the government puts steps in place soon to try correct this shortage.

    1. Yeah, getting kicked out by the owner is one of the disadvantages of renting. I think apartments are a better bet in this case, because the owner owns the entire building, so less likely that you’ll get kicked out.

      Vancouver is having the same problem and it looks like the 15% tax that the gov’t applied is having an effect. Hopefully you guys will get a similar kind of relief.

      1. Quick question, and maybe you can address it in the guest post. With the money you have, how do you deal with the desire to live in a nicer place back home when not traveling? Do you ever think, “I’ve got a million bucks in the bank for goodness sake
        , why don’t we rent a two bedroom, two bathroom at least?”

        I spent about 10-15 hours a day in my house now, from maybe 8 – 10 hours a day when I was working. As a result, I see more value in my house and want it to be as nice as possible.

        Thx

        Sam

        1. Good question. I think it’s because I grew up having very little, so I never developed a taste for fancy things. It just isn’t important to me. I would rather spend the money on experiences or building things. eg. if someone just gave me $3000 and told me to go buy an LV bag, I would rather just buy a cheap $50 bag and donate the rest. Dunno, I think it’s just my personality.

          1. I think it’s all about what you value personally. We have some luxuries that we splash out on, and our rent is one of them. We could rent a smaller, older, crappier house, or share with roommates, but we prefer to have a nice place to ourselves.

            On the other hand, I’m trying to cut down on cafe coffees – since I don’t get much value from this other than a full stomach. And we don’t do a lot of expensive travelling overseas, because I don’t value that as much and feel I can watch travel videos to get as much joy from seeing new places. I’ve got pretty poor memory, so most of what I’d remember are my static photos anyway, rather keep my money and watch other people travel to these places 😉

            The book “Your money or your life” by Vicki Robin and Joe Dominguez is a good one to help evaluate what’s worth spending your time and money on.
            https://www.goodreads.com/book/show/78428.Your_Money_or_Your_Life

            1. Oh, I wasn’t actually talking about like $3,000 LV handbags and stuff, but that is a good example as I don’t see value in stuff with 95%+ margins! I’d feel stupid buying such things.

              I’m talking about the value in living in a house, since the post is about housing as a scam.

              I LOVE taking long jacuzzi bubble baths while reading a good post or book, for example. So that is what I built in my house. I LOVE lounging on a deck facing west in the afternoon and overlooking the ocean. Sunsets are particularly magical. Hence, that’s what I’m building now. So yes, my values are having a nice lifestyle in a house where I spend 10-15 hours of my life.

              I DON’T spend more than 1/10th of my income on a car b/c I only spend on average 1 hour a day driving.

              In other words, I think part of the reason why there’s so much desire for property is because people 1) spend so much time in their homes, 2) want to be free to do whatever they want with their homes without having to move, and 3) if it so happens to ride the inflation wave, which it will, then fantastic.

              Don’t fight inflation. It will beat you with a stick. Ride inflation, so you can beat its ass instead.

              Sam

              1. I see what you mean. I guess people value different things. I’m just as happy living in an apartment as I am living in a house. I need very little space (because I hate accumulating things), and I would rather free up my time to write, code, or blog, rather than taking care of things around the house.
                Having a jacuzzi and deck is nice, but I HATE the maintenance that goes into it. It just adds more headache to my life and the extra gain is not worth it to me.

                Investing allows you to ride inflation as well. And homes just end up costing you money in the long run. I prefer to rent and not have the headache of having to replace things and upgrade. I guess I value freedom more than I value having a nice jacuzzi 🙂

                1. True. But I will tell you a little secret. You can actually still have a lot of freedom well also enjoying hot tub bath!

                  1. I don’t see it that way 🙂 You can hire other people to maintain the house but why would I do that? That just adds another level of headache that I don’t need. If you love property and love assessing its value, and looking for property managers, that might be a good use of your time.

                    Right now I have all the time in the world to do whatever I want. Would I trade that time to get a house I don’t want, and to find people to maintain it? Nope.

  17. Hi

    I completely agree with your post and your blog. Don’t get discouraged by the complainy pants.

    I have a unique situation where buying a home worked may or may not have worked out better for me then investing in stocks and bonds. Here it is

    I bought a home in Victoria, BC for 650,000 6 years ago with 200,000 down. It is a 4000 sqft 1994 build on 10,000 sqft that borders on farmland. It has 2 existing suites. I rented both suites out (3 bed 2 bath up and a 2 bed 1 bath down) for a combined 2700 including utilities. I then invested $12000 in the garage (500 sqft) and converted it into a full suite with a sleeping loft with skylight windows ( it’s beautiful). The home is worth about 685,000 now.

    expenses/month:
    mortgage (principal plus interest) 1900
    taxes 360
    hydro cable and internet and gas 490/month
    maintence 300 month
    total $3050 month

    income 2700 from rentals
    that means I 350 month for my monthly portion (the 500 sqft converted garage)

    if I invested the 200,000 in indexes I would have received about ~1300 a month
    so even with this “perfect” maximizing the properties money making potential I may have done better investing the money instead. That way I would have more freedom and not have to take care of a house with tenants lol.

    I think you are on to something by not buying and renting. Looking forward to your comments 🙂

    Thank you for your insight.

  18. I love reading this stuff. Very pointed but also very true. I guess I’m not exactly the poster child for this sort of investing as I own three houses. However I didn’t buy them in bidding wars and I actually DO own them (ie they are not mortgaged). Two are in Toronto. Also I didn’t pay huge sums of money for them (bought them in “not so prime” neighbourhoods that have now “gentrified”).

    Housing is a tricky gamble. What I am doing is earning 25% year over year capital gains, by purchasing houses in crap neighbourhoods then betting on a “gentrification” event (in my case it is the Eglinton Crosstown, which is adding to the value of my houses by about 25% per year as it slowly comes to life).

    But it’s a gamble. If all goes well I’ll have a few million to invest soon enough. Then yes retirement is the plan. Hopefully before age 50 (likely 47 or 48).

  19. The “mortgage is better than renting” conversation has just come up I believe for the first time today. Had to find an outlet to re-assure me.

    Living in Vancouver, housing prices are high. So today a coworker pointed out a 200k condo in nearby Surrey. My coworker of course only has my best intentions at heart, but it was a conversation I wasn’t ready to have to defend! The conversation went a little like this.

    Coworker (C): “Why don’t you and (girlfriend) buy a condo in Surrey for 200k?”
    Me (or Millenial – M): “Nah ownership is not for me at this particular time.”
    C: “Well why would you want to keep paying someone else?” *starts punching into a calculator* “You could pay ______ a month, less than you’re both paying for rent right now and own the place in 20 years. Plus housing always goes up ” (This is where I had a ‘whoa’ moment because she’s reciting verbatim the same words you have been saying are a blatant myth/lie. Also, I don’t think she was factoring in interest because as far as I know you need a bare minimum of an excel spreadsheet to get a semi-accurate figure)
    M: “Well there’s condo fees, maintaining the place and appliances.”
    C: “Yeah but your money is just going to somebody else, why not actually have something to show for it in 20 years?”
    M: “I’ll have a big fat bank account”
    C: “But you can pay LESS if you get a mortgage”
    (At this point I’m not ready to get into a long discussion)
    M: Yeah, well I’d have to live in Surrey.
    C: Well that’s a good point.

    Aside from forgetting to include the interest payments (which would be around 400-500 a month at the beginning), the main idea that’s got me a little bit shaken today is that, heck, I could be paying less and instead of paying rent, I’d be paying the bank about half of what my current rent is, then some money would go into the principal. I would have to account for strata fees (probably 150-200 a month or more). I know renting has to be the cheaper move, especially if girlfriend and I move in together. But after this conversation today I am slightly less sure of that.

    *Deep breaths, deep breaths, stay calm*

    I still know moving in together and renting for $1050/month is the way to go. Conversations like this upset me.

    1. Yeah mention you’re thinking of renting to any homeowner and watch them go into contortions to prove you wrong. What they’re actually doing is trying to convince themselves that they made the right choice.

      Renting for $1050 a month in Vancouver is a no-brainer. In fact, I’m going to throw this back in anyone’s face that tells me there are no reasonable rents in Vancouver! Stay Strong, M!

      1. Um, you can rent in Vancouver for $1050 a month? That blows the mind of this Hamiltonian with a serious crush on Vancouver! If the place is still available I’ll be on the first plane out west, lol.

  20. I am on a run, so here is my quick input. A huge proportion of super expensive homes in West Van are rich China immigrants. I work in the reno industry so I know, and there are more joining in daily. The country economy is lopped sided with the ‘bad’ in the mix. The government needs tax to survive, so there is no way they will stop them from coming and that 15% foreign tax is a joke. Also, the banks will readily loan that 15% even though it is illegal. Just trust that the banks will know how to make it legally good.

    What can we do? Work hard and work smart. Upgrade your education. Be a golddigger. Get a passive income. Strike a lottery. Pray to God for his help and a longer life.

    1. What can we do? Don’t play a rigged game. 🙂 As they say in House of Cards “if you don’t like the game, turn over the table.”

  21. Just wanted to commend you guys on this site, I’ve been binge-reading on and off all day and can’t get enough!
    I’m off to a late-ish start on my career at 29 as a software dev in Vancouver, and was definitely feeling the pressure to invest in property now “before it’s even WORSE”, yada yada yada, but as a totally risk averse person I feel waaay more comfortable/less stressed about the idea of renting and investing, than entering the real-estate gamble.
    Keep up the great work!

    1. Thanks, Michael and welcome to the blog! Having FU money instead a massive mortgage is the BEST stress reliever ever 🙂 Glad you have a good head on your shoulders. Stay strong and don’t give into “Home-Bonership”!

  22. I’ll be the devil’s advocate here because although I mostly agree with your point of view, I find that the biggest downfall of renting is not being able to live in as nice of a place as you could if you were an owner. Let’s say we are in one of Canada’s biggest cities and the total housing costs for a family’s home which was purchased is $2500/month when all variables are taken into account (as you’ve outlined in your other posts). The problem I find is that it is near to impossible to find an equivalent home to rent in the same part of town for LESS than $2500. In fact, most comparable rentals are more like $3500-$4000/month. So my question to you is this: you have to live somewhere, and assuming you have a family and want to lay down some roots, where do you live? Certainly there are very few $800/month rentals in the GTA these days…

    1. “find an equivalent home to rent”. That’s exactly the problem. People end up buying something with WAY more space than they need. WHY? Not because they need the space (I mean c’mon if you have 1 kid, why would you need 3-4 bedrooms?), but because they need to care about 1) re-sale value (need to appeal to other people with bigger families) and 2) buying more than they need just in case they have more kids and need more space. When you rent, you don’t have these problems. You can buy EXACTLY what you need. When we don’t have kids, we rent 1 bedroom. If we end up having 1 kid, move to a 2 bedroom apartment. If we end up having more, rent a 3 bedroom house. Etc. That way I don’t buy a gigantic house with extra upkeep costs for future scenarios that may or may not happen. And I don’t ever have to worry about resale value.

      As for rentals in GTA, people are WAY too hung up on renting condos in the downtown core. Move out a little bit to East York (so 30 mins by subway instead of 5 min), and you can find all sorts of deals. One of my friends is currently renting a place there for $600/month with his wife. Another couple with 2 kids are renting for $1600/month.

      And with the recent rental control laws in place, the landlord can’t even jack up the rent by more than 2%! You have WAY more advantages as a tenant than a landlord.

  23. I have to disagree. Owning your home is a GREAT way to make yourself financially stable, especially as you approach retirement. The problem is that too many people buy TOO MUCH HOUSE, and that’s what causes the stress.

    We purchased a modest house when we were first married, and we paid it off over the course of 11 years (during which we also had two children and saved for retirement and college). We have now been mortgage-free for more than a decade, and it’s great. The security of knowing that our house is OURS is wonderful, and we are able to live on SO LITTLE because we don’t have to pay for housing.

    Today our house represents about 5% of our total net worth. If we were suddenly 25 again, I’d make the very same choices again.

    1. That’s the thing. Time. If homeowners give homeownership enough time for prices to compound and debt to be paid off, it really is a wonderful think. Buy too much house and sell too soon are the killers.

      I actually bought one too many houses and finally sold one last month. Instead of 5% of my net worth, property went up to 40% of my net worth, so I wanted to get it down under 30% given the markets have been on fire.

      Sam

      1. Hello,

        Need help. Over the years I’ve saved a lot. Currently our portfolio pays $40,000 in dividends per annum. We have 17 more working years ahead; were young. Yes, we own our home (seems taboo here) no mortgage.

        My wife wants to buy a house for 1.5 mill which we can buy outright, but it will pair us down to $14,000 dividend payouts per annum. This is killing me.

        Future income over the next 4 years, without moving would have us closing in on meeting living expenses through dividends.

        She seems to be hellbent on it and I know it won’t crush us but damn I’m loving the dividend payments. Any good forecasting calculators out there? I feel like we’d be able to retire around the same date anyway, but to me one way is so much cooler. I suppose we could down size the home in 15 years from now too….

        1. 40K/year in dividend is pretty sweet! I’d be pretty upset to have it cut down to 14K as well. That would increase your stress level for sure.

          That being said, it’s something you’ll have to work out with your wife. You don’t want one side resenting the other, because that could get ugly over the long term. Could you come to a middle ground? Like buy a less expensive house? Rent out part of the 1.5 Million house? (the caveat to that is you’d have to share your space with other people, and if you get a bad tenant, they could cause you major headaches)

          Does she realize that it’s not just 1.5 Million, there’s a shitload of other costs that come with home ownership as well? (like maintenance, insurance, property taxes, closing costs, etc etc). If you did all the numbers and included all these costs, then maybe you’ll be ok, but again, it’s a personal decision.

  24. When you rent you are paying someone else’s mortgage. Interest, tax, maintenance. It’s all packaged into your rent whether you realise it or not.

    In 10 years time, your rent will have gone up significantly, your mortgage repayments will remain pretty much the same, or at least significantly lower than the rent on an equivalent property.

    I don’t believe in investment properties, the money is better invested elsewhere, but choosing to rent your primary residence when you are in a position to own it is just foolish.

    And yes, it’s equally as foolish to borrow a huge amount of money at a low interest rate and not be prepared for it to rise.

    1. “Interest, tax, maintenance. It’s all packaged into your rent whether you realise it or not.”

      HA that is SO not true. You’re assuming that every landlord is good at math. We have found, time and time again, that you can find deals where the landlord isn’t even breaking even on their so-called “investment” with the rent they are charging. Also, rent control in Ontario has been enforced since April. Rent cannot increase by more than rate of inflation. AND in 10 years time, your property taxes, maintenance, insurance, also goes up. Those are costs that add nothing to equity and you have to pay it forever. So no, you don’t get to stop paying rent once you buy a house.

      But, hey, if you want to buy into the bullshit of rent = throwing your money away, go right ahead. I’m sure the real-estate agent shysters and banks are very happy to have your money.

      1. Renters have no home equity to draw on, and they don’t save any extra money on a weekly basis.

        Their costs only ever go up, they never remain steady, they never go down.

        There is no advantage to renting other than being able to move without the hassle of selling.

        In saying that, it’s certainly true that some homeowners get themselves into trouble by borrowing more than they should or drawing on their equity unnecessarily and end up worse off than renters.

        At the end of the day, if you really prefer renting for some reason then do it, it’s a free country. But don’t kid yourself into thinking it’s a good financial strategy.

        1. Don’t kid myself, huh? Well, it made me a millionaire and allowed me to travel the world, so I’d say it’s a fan-freaking-tastic strategy.

          “Renters have no home equity to draw on, and they don’t save any extra money on a weekly basis.” This sentence right here shows that you know nothing about index investing. The alternative to owning is not to rent and stick your money in a savings account. It’s rent + index investing. The dividends from my ETFs pays my rent without me having to work. So thanks for paying your mortgage so that it comes back to me in dividends from my bank stocks.

          Thanks, but I prefer not to take advice from people who call themselves “wisdom” but don’t use any facts or numbers in their argument and have no idea how investing works.

          1. Good for you, but renting didn’t make you wealthy, intelligent investments did.

            You could have been paying a mortgage and investing your savings and you would be better off.

            Who cares, you’re a millionaire, just enjoy your life.

            1. I must admit, as a subscriber of this comment thread, I cannot get enough of this “rent versus buy” debate! It’s literally like I want to heat up some popcorn before reading and stuff! 😛

              So…. I just sold a home I’ve owned in San Francisco since early 2005 this year. It was awesome living in it for almost 10 years, even through the financial crisis. And it wasn’t so awesome being a landlord for 3 years… so I got rid of it.

              I will say that this $305,000 downpayment that turned into $1,800,000 was the best absolute dollar investment of my life. There have been other investments that returned a great deal more percentage wise, but this home investment took the cake.

              I feel bad selling b/c I know it’s going to be worth much more 20 years from now. But I felt I had to live for today.

              Thoughts you two?! Post about why I sold my house is in the Website space.

              Sam

  25. The only time buying a home is a good investment, is if you can pay for it cash or a have a sizable down payment. Beyond that if you’re putting down a small down payment and might end up selling it in a decade, you’re making a huge mistake.

    Lets say you time the market right and the house goes up 50k on a 250k home, wow you make 50k, yeah right. In that decade you paid about 100k in up front, amortized interests, plus you paid fees for the priviledge of paying all that interest and closing costs. So in the end you lost money.

    So the bottom line is unless you can afford to pay off the mortgage and enjoy rent free living someday, buying a home, benefits realtors, lenders, builders and the government, not you.

  26. Help me out here. You folks that are talking about ETF’s and other non-real estate investments, what are your net worths? What is your monthly after-tax income? I hope you’re not shooting your pie holes off because you make a measly $2k/month.

    And to the OP, you need to remember that if you buy a house for say, $200k, if you are buying it with 20% LTV ($40k down) and real estate goes up by 16%, it’s not an ROI of 16%, it’s an effective return of $32k (16% of $200k) on a $40k (downpayment) or a little over 75% ROI. It’s a hell of a lot more than your 22% on your REIT. Most arguments I here about real estate being a less than stellar investment usually forget this simple math. Now multiply that by a number of houses, like 10 well managed rental properties and you’ve made $320k, and so far completely tax free, just like an RRSP. If you need money you simply refi and take out some equity, and of course that is also tax free, since you don’t pay income tax on a loan, only on income.

    If house prices go down, which we all know happens and I’ve lived through several downturns, as long as your rents covers all your expenses you will come out ahead every time. The other forgotten fact about real estate is that no matter how big the bubble it will always pop. But here’s the magic – no matter how far real estate values fall, 100% of the time they climb back to where they once were, and then climb higher. Every time.

    Landlords like me aren’t real estate speculators, we run our rentals like any other business. The focus is on making money every month, when house prices are too high don’t buy, wait for them to fall. When people aren’t buying they’re renting. When the supply of rentals drops rent prices go up. When real estate prices go up, less people can afford to buy and people are renting and the supply dries up and rents go up. I’ve been a landlord for 30 years and for 30 years it’s been a landlords market regardless of the direction of real estate prices.

    Yes, I agree that everybody should be renting – FROM ME!!

    At the end of the day, if you enjoy what you’re doing and it’s working for you stick with it. Don’t bash what works for me and I won’t bash what works for you. As long as you’re rich, and you got there legally, who cares.

    1. “what are your net worths?” “Landlords like me”

      If you had actually bothered to READ the blog, you’ll see that I share our net worth and investments in detail. I also find it funny that you’re confusing real-estate investing with buying a home. Real-estate investing is a very valid way to reach FI (which is why I mention Paul Pant from Afford Anything consistently on this blog) and a completely different story from buying a house to LIVE in. Maybe actually READ the blog before going off on a tirade?

      1. Wow, you really are a firecracker! Btw, I’m not the one confusing buying a home with investments of any sort, you are. But since you went off on me allow me to offer a bit more on buying a home. If you were to buy a home today with a 25 year mortgage, at the end of the 25 years your monthly mortgage payments would be nada, zip, zilch. If you rent, in 25 years and for the rest of your life you would be paying an ever increasing rent payment. The average renter moves every 2.5 years. When you move into a rental the landlord is free to charge whatever the markets will bear. If you had bought a house in Toronto 25 years ago your mortgage payment in all the years of ownership would be under $1000/month and as of today you would be paying nothing. If you were renting, and moved anywhere in Toronto within the last 2.5 years you would likely be paying around $2500/month rent, and would continue to do so for the rest of your life on an ever increasing scale. That’s $30k a year, plus. I don’t know anyone who pays $30k a year in home ownership costs once the house is paid for. Also, that $300k house you bought 25 years ago is today conservatively worth $750k. In the next 25 years you will be paying, conservatively, about $1,000,000 in rent. There’s no hope you would be paying that in repairs, maintenance and upkeep on your own home. Like I said, renting is totally the way to go, especially if you are renting from ME!

        As you said, ETF’s and stocks are linked to corporate profits. Real estate is linked to inflation. The economy is growing, jobs are growing and the country is growing. My money is on prolonged growth and inflation. With that comes increased real estate prices and increased rent prices. I have tenants whom I’ve had as tenants for a decade. Their rents are low and they truthfully cannot afford to rent elsewhere at todays rates. If they had purchased homes instead of renting, and wanted to move, they could easily afford to sell their houses, which have increased in value by about 300% in the last few years and move on. But they didn’t and now they can’t afford to move. Now house prices are in decline, but guess what? Rents are on the rise. They still can’t afford to move. I’m sure there are a hundred thousand people in Toronto who wish they had bought a decade ago. Their mortgage payments would be half of what they are paying in rent if they have moved in the last couple of years. They would be building their own equity and net worth, instead of building wealth for guys like me.

        Sure there’s work to owning a home. But there’s work to renting too. My tenants cut the grass, not me, they shovel their snow, not me, they clean their houses, not me. When they move I can expect to spend about a thousand dollars on painting, flooring, or whatever and very often it’s less. Then I raise the rent. In the first year I usually recoup the cost of tenant turnover.

        Nothing worth having comes easy. As for a passive income, there are at least three ways to win with home ownership – active appreciation, meaning upgrades to increase your homes value; principal recapture, meaning a portion of every mortgage payment goes towards your loan; and the biggy – passive appreciation, meaning your house goes up in value while your at work, on vacation or sitting on your couch smoking a fatty. Passive appreciation on my own home has been roughly 300% in the last few years, all tax free! How are your REIT’s doing? 22%? Boring.

        Now we have a perfect storm brewing for R.E. investors. Real estate prices are dropping and rents are going up because people like you instill a crazy fear in prospective purchasers, so they rent. Thank you for that, btw. I’m not on any tirate at all, in fact, it’s just the opposite.

  27. Oh, and the other flaw in your argument is that you are comparing owning a home to non-tangible investments like ETF’s, stocks and the like. People that buy a home to live in typically are doing it to have a roof over their head and a place to sleep at night. Trying to equate home ownership to other investments is like arguing that a guy who has a gold tooth in his head is now a precious metal investor. He didn’t have gold teeth installed with the intention of selling for a profit later, he had them installed because he needed teeth. He just thought the gold would look slick, or whatever.

    Now re-read my points above and understand the difference between buying a home you plan on living in and being a real estate investor. A $32k tax free return on a $40k down payment where the tenant pays all expenses is an 80% ROI. It’s tax free and compounds annually tax free. Equity can be extracted tax free at any time as long as there’s equity.

    I am an investor in the Niagara Region where yes, you can still buy a single family rental home for under $250k, a condo for about $150k and apartment buildings for $120k per unit. Rents in my area will ABSOLUTELY carry the property with a little left over at the end of every month. I own properties in Welland, Niagara Falls, Port Colborne and Fort Erie and my absolute favourite properties are in The Canadian Caribbean, The Banana Belt of Ontario – Crystal Beach!

    1. No, I’m comparing owning a home versus RENTING and investing in ETF’s. Renting also allows you have a roof over your head, without having to deal with the unexpected cost of maintenance and all the extra headaches that come with home ownership.

      Also, real-estate investing is different from owning a home to LIVE in. Real-estate investing is a valid way to become FI, but it’s not like passive investing. It’s a BUSINESS and requires a lot of work, just like any other business. But no, this article is not about comparing real-estate investing to investing in low cost ETFs. It’s “renting and investing” to putting all your assets in 1 house that you live in and calling it an “investment”.

      1. Okay, so now I figured it out. You’ve never been a landlord or real estate investor because if you had, you would know that it’s NOT a lot of work. Once your tenant is in the only work you do is run to the bank every month to deposit those rent cheques. Unless of course you can e-transfer.

        Are you aware that the average home owner in Toronto, in 2016, was earning $625/day in passive appreciation? How much was the average renter earning? Oh that’s right, but at least he didn’t have to change his own light bulb.

        1. “you would know that it’s NOT a lot of work”

          That right there, shows that you’re a scam artist. If you were a true real-estate investor like Paula Pant or Coach Carlson, both who are actually part of the FIRE community and don’t bullshit people about how much work, knowledge, and experience it takes to become successful at real-estate investing. They don’t pull the wool over people eyes, and actually lay out the facts.

          Picking home appreciation in specific area in Toronto is like picking an individual stock and patting yourself on the back for being a genius. Not reproducible, not diversified, and illiquid.

          Scam artists like you, who know nothing about diversification and risk hedging are exactly what’s driving the real estate ponzi scheme. Thanks for proving the point of my article.

  28. I guess I touched a nerve.

    No, I am not a scam artist and I’m not exactly sure what you’re ranting about. Long story short, you’ve never owned a piece of real estate in your life because you are afraid of a little work. All this nonsense about not working or not wanting to work because your too lazy is exactly what’s wrong with so many people in this country.

    My advice for your readers is that if you want to be wealthy then yes you will need to work hard and work smart. Take every penny you earn and invest it in yourself. Don’t make the mistake of buying the most expensive home you think you can afford and spend the rest of your life trying to pay for it.

    Rather, buy a cheaper home that you can easily afford, or, better yet, buy a duplex/triplex or fourplex and live in one of the units while your tenants pay your mortgage. Once you build some equity, you can refinance the whole building, rent out your last unit and have an amazing downpayment for either another investment property or as a down payment towards your own home. Which is smarter: taking out a loan for a million dollars and trying to pay it off yourself, or taking out a loan for a million dollars and having other people pay it off for you? Duh.

    And to the dumb ass that wrote this article: Not everyone has the ability to both pay for housing, whether renting or buying, and have $300,000 to invest at 22% for a before tax income of $66,000, which is something like you are talking about.

    Ironically, we are both encouraging people to rent. You believe renting lies on the road to wealth I believe other people renting is my vehicle to wealth.

    You’re right in that I did not read the entire blog. I have read enough of this type erroneous drivel to know where you were going with it. If you want to live the life of a lazy socialist who wants to own nothing and have everything given to you while you complain about how the government owes you and it’s all one big conspiracy to stick it to the little guy that’s your misconception. I came from the gutter and through hard work and sacrifice I was able to create a life for myself where I now collect the rents and hire people to do the work and support my local economy while getting wealthier by the day and yes there is a part of me that feels sorry for those who are too afraid of hard work and taking a chance to better their lives because they listened to fear mongers like you.

    Beating you up when you are wrong is way too easy. Calling me a scam only shows what an idiot you are. The numbers don’t lie. You are misleading your readers and refuse to accept that what has worked for so many for so long is not reality and is somehow a scam. Wtf? Are you smoking crack?

    How many millionaire tenants have you ever met? How many real estate millionaires have you ever met? Sorry firecracker, I’m kind of ignoring you right now. What a dumb article.

    Attention readers: if you want to be financially independent one day go buy your own home, preferably with a rental suite. Never pay rent. Live at your parents until you can afford a down payment. Buy only what you can afford. Put some sweat equity into the place to increase your equity. Watch your wealth grow tax free over the years. Refinance tax free at some point and buy a rental. Work hard when you are young so you can enjoy your life when you get older. Watch reruns of Scott McGilvrey’s “Income Property” to get started.

    Fortune favours the bold.

    Complacency is the enemy of wealth.

  29. Referring back to your friends in the article, it’s not that home ownership was stressing them out of their minds, the problem was that they bought houses they couldn’t afford.

    Maybe they should have considered buying a fourplex as their first home while they were single. Most financial institutions will allow you to buy a four unit building with a 5% downpayment as long as the owner is living in one of the units. Under this strategy your friend could have bought a $600,000 fourplex for $30,000 down, collected $1500/unit/month rent and lived in one unit. It would have looked something like this:

    Mortgage – $3000/month
    utilities for her unit – $150/month
    taxes – $300/month
    maintnenance – $250/month

    Her total income would have been $4500/month
    Her total expenses would have been around $3700/month.

    This scenario is very plausible and happens every day all across the country. No scam. The numbers don’t lie.

    If real estate prices rise by your number, 16% in a year, then she would have earned $96,000 in passive appreciation. This would be an effective ROI on her $30,000 investment of 320%, (tax free, not including net rental incomes). This happens all the time for people who understand and invest in real estate. So you see, it’s not the game, it’s the players.

    Just because you and your friends bought the wrong houses doesn’t mean the problem is with real estate. The problem was you and your friends not understanding real estate (most people don’t).

    Even you admit that you cashed in your real estate to pursue something you enjoyed and understood better. No harm, no foul.

    Maybe you should have written an article on something you understand, like ETF’s. I would love to learn more about them.

    1. It’s really funny how sometimes people go to a website and read just 1 of the hundreds of posts on the website. Take a look around and you’ll see that they’re written tons about ETFs and how to invest in them.

        1. You know the guy who goes to the party and doesn’t listen to what anyone there has to say but just contributes his opinions at high volume? Yeah.

          1. You know the woman who goes to a party and starts shooting her drunken mouth off about herself and puts down whatever she doesn’t understand? Yeah.

            If you have an intelligent rebuttal to my comments I’d love to hear them. But so far… (Cue Billy Joel’s “Big Shot”).

              1. “What are your thoughts on home ownership” – the last line of the article.

                If you don’t want to know, don’t ask.

              2. “what are your thoughts on home ownership?” – the last line of FIREcrackers article. I was invited to the party, I’m not crashing it.

                plam: are you taking FIREcrackers investment advice? How is it working out for you? After you sold your home in K-W, are you renting? Are you retired and travelling the world on your pre-tax investments of 6%? Instead of insulting me, tell us more about your financial success!

                statistic: more people have become millionaires through real estate than all other investments combined.

                1. Usually when you’re invited to a party, you listen to the other people at the party and figure out what the scene is like, rather than crashing it and outputting a lot of noise when you come in the door.

                  I think about the inflated house values all the time. As it turns out, I like my condo and can afford to own it. I am under no illusions that it is an investment. It’s more of a money sink, but that’s a conscious decision. The people who just bought the unit next to me to rent out, though, are going to lose big, because they are going to be cash-flow negative, and they will be subsidizing their renters to the tune of $4k in the first year.

                  I do travel the world, but I like my job, so I’ll stick with it for now. My investments, which closely follow their philosophy. are up this year. They are also far more liquid than real estate, and when the new mortgage rules come into play next year, they are not going to crash.

                  FIREcracker even positively mentioned real estate investors who have a more nuanced view of the benefits and, yes, dangers of real estate investing. Playing with leverage can get you more return, but you can also lose money that you don’t have.

                  1. My apologies if I came across a little too strongly for something I am so passionate about. But remember, FIREcracker drew first blood when she called real estate a “scam”, and then called me a “scam”. If she didn’t want my two cents then she shouldn’t have asked. I mean, I get Warren Buffett is one of the wealthiest guys in the world, but look at all the real estate millionaires there are in Canada.

                    Good for you for owning your own home, but calling it a “money sink” when the alternative is renting just doesn’t make sense to me.

                    Just curious, how much is your neighbour charging for rent? Is it comparable to what your mortgage payment is? Do you think you would be better off paying his mortgage than your own?

                    1. I don’t have a mortgage. I don’t like owing money. I could invest with the bank’s money, and I’m sure I’d be ahead over the long term, but I choose not to.

                      I don’t know what the neighbour is charging for rent, but I checked out what the market seems to be bearing for rent for comparable units, and at that price, it is less than mortgage (on their purchase price) + taxes + condo fees + maintenance. The price-to-rent ratio is 5, so I don’t think it’s even close.

                      I’ll acknowledge that FIREcracker likes to use incendiary language. But I think that it’s super valuable to question the received wisdom. And a lot of people think that the only way ahead in life is to buy real estate. I strongly disagree with that. It can work out for people if they are thoughtful about their purchase, but it’s not guaranteed money, especially at these prices.

                    2. Hey plam, I read a lot of fear in your responses. Fears are stories we tell ourselves. We imagine the worst case scenarios to justify our lack of courage. If you ever want to be financially independent you need to jump outside of your comfort zone. When you land, you will be in your performance zone. Yes, it’s scary, but eventually your former scary performance zone will be your new comfort zone. Then guess what you do? You jump outside your new comfort zone and into your further expanded performance zone. Yes it’s a little scary, but once you have conquered your fear then success will be as natural as breathing air..

                      Take the leap and the net will appear. – Chinese Proverb

                      Fortune favours the bold.

                    3. Unsolicited advice is always welcome, right?

                      I’m doing just fine, thanks. My job is good and soon enough I’ll have enough money to do what I want.

                      I also notice that you haven’t addressed any of the points I wrote about in my last response, which you asked me about.

                      Plus, you are commenting on a blog post that is 18 months old, so most people have checked out long ago. You might check the main page of the blog at https://www.millennial-revolution.com/ and the recent entries.

                    4. My bad, to address your responses, I don’t know what your neighbours strategy is for renting at a $4k/year loss. It seems dumb to me but if he’s been in real estate for a while I’m sure he thinks he has some angle to make money. It sure doesn’t reflect anything in my rentals.

                      Good for you for owning your home. It flies in the face of FIREcrackers preachings so obviously you don’t agree with her on home ownership.

                      I don’t really have anything to add other than if you are satisfied with how your investments are performing then stick with them. Like your neighbours strategy, I don’t understand how anyone could brag on a 6% pretax return on investments especially since the effective rate is pretty much zero after you factor in taxes and inflation but if it makes you happy that’s fine by me.

                      If you have $250k in equity I believe you would be far better off to refinance your home to buy an income property. Since you are using the funds for business investment your interest on your principal residence is now tax deductible. If you believe that real estate is going to tank in 2018 then buy when you think the market has hit rock bottom, or as near as you can figure. In my area there are not many single family homes that would earn a monthly profit worth mentioning but that changes when you buy a duplex (or greater number of units). I see prices are falling monthly, though, and soon enough single family houses will easily carry themselves again.

                      The key to making money in any market – stock market, bond market, money market, real estate market – is to buy low and sell high (I know you know that). We are now (finally!!) entering another era where real estate prices will drop and you and I can buy real estate at a lower price (my fingers are crossed). Short term, you should be able to make money monthly on the rentals. Long term, governments will change, policies will change and house prices will go up (as in the past, 100% of the time!).

                      The sad reality is that the wishes of all those people who wanted house prices to drop so they could afford home ownership will now be talking each other out of home ownership because prices are dropping and home ownership is a bad investment (the “sheep mentality”).

                      The golden rule to make money in real estate: buy when everyone’s selling and sell when everyone’s buying. Sheep mentality states: buy when everyone’s buying and sell when everyone’s selling.

                      I wouldn’t count on much of a decline in house prices. The population in Ontario is growing at a record pace. Everyone needs a roof over their head. This means two things: rents will increase, and, house prices will not decrease by much and it won’t last long.

                      I remember in 2007, at the time of the real estate crash in the U.S. The prediction was that house prices in Canada were going to follow. The reality is that prices in my area came down by maybe 10%. Hardly a crash. Did you even notice? Then, as per usual, prices rose back to where they were, then climbed higher – in both Canada and the U.S.

                      Truly, I am hoping that house prices drop, and the more the better from my perspective and yes I will be buying. As history has proven over and over, no matter how low real estate prices go, they will undoubtedly climb back to 2016 prices, and then climb higher. Remember where you heard it first.

  30. Thinking… when people are reading this blog, I hope they come to the realization that YOU are the scam. How could you pass yourself off as a retired investment guru when you are telling people how you invest at A LOUSY 22% and people should consider “a diversified portfolio earning 6%”. You can’t retire on paltry returns like that! Well, maybe if you had a million dollars earning 22% but come on. You’re the scam. Busted!!

    FIREcracker: please do the world a favour and STOP GIVING INVESTMENT ADVICE!!!

    Note to readers: RUN!!

  31. You had to be a big shot last night
    know what everything’s about.

    You had to be a big shot
    All your friends were so knocked out

    …and the stories of your latest success
    kept ’em so entertained.

    If you don’t want to hear the truth about Real Estate from someone who’s doing it then don’t provide a blog format.

    Those who say it cannot be done should not disturb those who are doing it. – Chinese Proverb.

  32. …and another flaw in FIREcrackers’ statements: “no matter how much real estate appreciates, you can never sell your own home”. Anyone who lives within a 200km radius of the GTA knows that’s not true. Many thousands of homeowners HAVE sold there homes in the GTA and taken their $500k+ tax free profits and moved to cheaper locations like Pickering, Oshawa, St. Catharines, Binbrook, Stevensville, Ridgeway by the Lake, London (Ontario), Cambridge, the Canadian Caribbean and dozens of other cities and towns.

    I get that real estate is not for everyone, but please FIREcracker get your head out of your ass and realize that YOUR WAY is not the ONLY WAY. It may be the only way for you, but there’s dozens of investments that can achieve people’s financial goals.

    And by the way, when did working for a living become so evil? If you have it, someone worked to make it. Maybe they enjoyed making it. Any time I ever wanted anything in my life all I had to do was work a little harder and presto!

    This obviously isn’t a very popular web site. No one has spoken out to either agree or disagree with my thoughts.

    You had to have the front page, bold type
    you had to be a big shot last night

    …and when you wake up in the morning
    with your head on fire
    and your eyes too bloody to see,
    go cry in your coffee but don’t come bitchin’ to me.

    I’ll give you one hint honey
    you sure did put on a show…

    It’s like he wrote that song just for FIREcracker.

    AMF YOYO and good luck!

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