Friday, February 24, 2023

Short Takes: Rental Real Estate, Example TFSA Uses, and more

I’ve lost count of the number of real estate agents and mortgage brokers in Canada and the U.S. who’ve told me that right now is a fantastic time to buy a rental property.  Usually, they don’t own any rental properties themselves and have no plans to buy one now, but they’re sure that it would be a great time for me to buy.

When I say that I’m not interested in using my capital to buy the part-time job of being a landlord, they tell me to hire a management company.  When I tell them I’ve heard from landlords that management companies soak up most or all of the profit from being a landlord, they usually give up on me.

I guess my message here is that I’ve found a fairly short path to ending an uninvited sales pitch about real estate.  You’re welcome.

Here are some short takes and some weekend reading:

Robb Engen shows that TFSAs can be very useful for smoothing out life’s financial bumps without creating a big tax bill.  This gives you time for the necessary next step of restoring TFSA savings.  RRSPs don’t work as well for this purpose.

Andrew Hallam has some news for people who think we’re living through especially bad times for our finances.

Morningstar
says Canadians shouldn’t be in a hurry to buy a house.  The reasoning makes sense to me, but I find it hard to believe that these things can be predicted with any certainty.

6 comments:

  1. Starting at 30 years old and nearly zero NW, real estate got me to early retirement in about 15 years (2005 -2020), weather its just pure luck or having the foresight to take a strong position in real estate before the strong GTA real estate application, it paid off handsomely with incredible gains since 2005. Not many jobs could have matched those gains but I must admit that real estate is not passive income, but was it worth it? Hell yea, it was worth it! It's not for everyone, but those who can deal with people and clean up after others can become very wealthy over time but you need to be patient, committed for the long haul and if you get lucky it might take you less than 15 years but be prepared to work at it just like any other business and it helps if you have some basic maintenance and management skills. That could save you thousands of $$$. In my own opinion, it’s the easiest type of business to own with less risk, if you prepare well and stay committed long term. It was my road to financial freedom, now that my houses are all paid off and no debts, I'm slowly selling out of real estate, one house at time and using the proceeds to invest back into a globally diversified stock portfolio. Yes, the capital gains are high but the piece of mind of not having to having to worried about real estate management and repairs as I get older is a good trade off. I wish Canada had a 1031 exchange program like the US. If anyone knows a strategy that I should be aware of, please let me know!

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    1. I'm glad your real estate investments and landlord job worked out for you. I know some real estate agents and mortgage brokers who would like to talk you into buying more properties :-)

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    2. Or selling properties lol

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    3. Ironically, I bought most of my properties on my own, with no agent. Only the first two, I bought with an agent, then a smarten up. In reality, you don't need an agent to but property but most people don't do it because they are afraid and they don’t put in the time to understand that all they need a purchase and sale agreement from a lawyer. They lose out on thousands of $$$. They think the agent will protect them, (perhaps to a degree!) In my opinion, real estate agents are a bit like mosquitoes, they are so annoying and they suck a lot of money/blood out of you and you don't even notice it, because they tell you its the "other party" who paying. Right! Follow the money folks, you are paying!!!

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  2. Michael, I was trying to follow your approach using Google sheet in getting rebalancing notification. But I could not find data related to ask-call spread. Do you use third party data for that? Thanks!

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    1. Whenever I make a trade, I take note of the spread, and I use a hard-coded value for the typical spread. I tend to bias the hard-coded value toward the higher spread values I see. If I'm rebalancing and the spread is significantly larger than my hard-coded value, I think twice about whether it makes sense to trade. So far, the spread has never been high enough to avoid trading, but it could happen. This may seem elaborate, but I trade so infrequently that it's not a big deal.

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