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I don't like that we compare the leverage of a mortgage to the leverage of a margin account.

First, as noted, when you leverage more than 5x (20% down payment), you have to pay CMHC. I'm currently paying a premium worth 4% of my purchase price because I've put the minimum down payment which was near 20x leverage (a bit more than 5% down payment). That's 4% of the total amount that I won't ever see again, it's an expense.

Second, as I live in Quebec, I had to pay the transfer tax, which was worth almost 1.5% of my property value. Another amount that I won't ever see again, an expense.

I also had to pay the notary fees, the inspection fees, etc. That's not much, but still over a thousand dollars.

Third, when I'll sell, if I deal with realtors, it'll cost me maybe 4% in commission, that's a 4% on the sell price that I won't pocket. But if it's my principal home, then I don't have to pay taxes on capital gains, as opposed to selling in a margin account.

Fourth, every year, I pay about 1% of my property value in taxes. Plus the cost of insurance.

Fifth, every year, I must budget for maintenance costs, which are about at least 1% of my property value. And add to this the time wasted on that maintenance every year.

So, did we add up all the costs, so far?

Sixth, all that leverage went into a single asset. That leverage is definitely not diversified. It is not liquid, as I cannot decide to sell it tomorrow and get my money tomorrow. I also cannot decide to reduce my leverage by selling half of my property.

Seventh, it's a leverage that has a term so I'm committed to pay back a part of the capital every month, not only the interests.

Eighth, as far as what I've seen on my brokerage, you can leverage 5x when you buy "safe" investments like SPY (and even QQQ, ha!) where you need only 20% of cash, same as buying a property without CMHC. But yeah, then there's a margin call to watch for.

Anyways, I mean, there's so many differences between the leverage of owning a property with a mortgage and the leverage of owning equities in a margin account that the comparison is just apples and oranges, IMO.
 

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Discussion Starter · #244 ·
Sixth, all that leverage went into a single asset. That leverage is definitely not diversified. It is not liquid, as I cannot decide to sell it tomorrow and get my money tomorrow. I also cannot decide to reduce my leverage by selling half of my property.
Very good points, including this one. The concentration in a single asset is really a noteworthy disadvantage.
 

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Mr. Blackhill
That is a good summary, There is also the cost of building inspector/appraisal.

Plus much of the maintenance such a lawn maintenance and snow removal is often unpaid servitude that owners often bear themselves. I know a number of former owners who love the personal time they get back.

And there is the siren song that we should "invest" in whatever because it will improve the property value.

And making a change is a huge financial commitment (high frictional costs).
 

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Discussion Starter · #246 ·
And there is the siren song that we should "invest" in whatever because it will improve the property value.
From what I see among friends of mine, people are spending a ton of money on these constant upgrades and renovations.

I think it's a kind of sickness that has seized the nation. It's some kind of renovation mania, where people really just want more luxuries but tell themselves that it will improve the property value.

The never-ending real estate bubble just fuels this as well, since people feel justified in spending massive amounts on their home, since "it's going to help boost the value even more".

And I have friends doing endless renovations in all cities. Vancouver, Calgary, Winnipeg, Toronto, Ottawa, makes no difference. Spending insane amounts of money.
 

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From what I see among friends of mine, people are spending a ton of money on these constant upgrades and renovations.

I think it's a kind of sickness that has seized the nation. It's some kind of renovation mania, where people really just want more luxuries but tell themselves that it will improve the property value.

The never-ending real estate bubble just fuels this as well, since people feel justified in spending massive amounts on their home, since "it's going to help boost the value even more".

And I have friends doing endless renovations in all cities. Vancouver, Calgary, Winnipeg, Toronto, Ottawa, makes no difference. Spending insane amounts of money.
Absolutely. I see some where they are enjoying it.
But some, I'm not sure what they're thinking. Last year they put in new flooring, now they're ripping out a wall (load bearing so they have an Engineer coming in, to redo those same rooms again. It's crazy.
 

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Discussion Starter · #248 ·
But some, I'm not sure what they're thinking. Last year they put in new flooring, now they're ripping out a wall (load bearing so they have an Engineer coming in, to redo those same rooms again. It's crazy.
My poor old parents are actually suffering from all this. They live in a condo, and everyone in the building is frantically renovating their condos.

This means constant noise, hammering, power tools. And then their water is shut off every few weeks, for some plumbing work (or a plumbing disaster from renos). Some idiot in the unit directly above them tried his own plumbing, causing a leak which trickled down and destroyed some of their ceiling. Right during COVID lockdowns.

All these renovators are having tons of fun. Nothing more fun than tearing up the floors again!

Meanwhile, my parents suffer. The never ending noise is unbelievable. My mom now stores water in buckets and plastic jugs, because the water shutoffs are so frequent.

It's sick.
 

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Plus much of the maintenance such a lawn maintenance and snow removal is often unpaid servitude that owners often bear themselves. I know a number of former owners who love the personal time they get back.
Yup. I've owned a few houses and rented a few outside of Canada.

The deck needed to be repainted on the last house. I spent a lot of time painting shingled houses, barns etc as a teen so a little deck looked easy enough. Just a small weekend project right? After multiple trips to Rona and a small fortune spent on supplies I found myself wasting several weekends. The buyer immediately tore that deck down for an expansion.

If you are good to your landlord and they are good to you renting is great. I always pay on time and respect their property as if it was my own and they've been great for me. They are always happy to look after the place if I'm gone since it is theirs. My capital does much better invested elsewhere because I can trade and diversify. No surprise property tax and insurance rate hikes

I much prefer renting
 

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Discussion Starter · #250 ·
The deck needed to be repainted on the last house. I spent a lot of time painting shingled houses, barns etc as a teen so a little deck looked easy enough. Just a small weekend project right? After multiple trips to Rona and a small fortune spent on supplies I found myself wasting several weekends. The buyer immediately tore that deck down for an expansion.
Wow... it's sad to hear that the buyer immediately tore it up. Think of all that wasted effort, but also the wasted raw materials.
 

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My poor old parents are actually suffering from all this. They live in a condo, and everyone in the building is frantically renovating their condos.

This means constant noise, hammering, power tools. And then their water is shut off every few weeks, for some plumbing work (or a plumbing disaster from renos). Some idiot in the unit directly above them tried his own plumbing, causing a leak which trickled down and destroyed some of their ceiling. Right during COVID lockdowns.

All these renovators are having tons of fun. Nothing more fun than tearing up the floors again!

Meanwhile, my parents suffer. The never ending noise is unbelievable. My mom now stores water in buckets and plastic jugs, because the water shutoffs are so frequent.

It's sick.
Did you have a part in talking them into a condo building, I wonder? With your hate-on for living in blissfully quiet detached homes and the American dream? :p

From what I see among friends of mine, people are spending a ton of money on these constant upgrades and renovations.

I think it's a kind of sickness that has seized the nation. It's some kind of renovation mania, where people really just want more luxuries but tell themselves that it will improve the property value.

The never-ending real estate bubble just fuels this as well, since people feel justified in spending massive amounts on their home, since "it's going to help boost the value even more".

And I have friends doing endless renovations in all cities. Vancouver, Calgary, Winnipeg, Toronto, Ottawa, makes no difference. Spending insane amounts of money.
Fair enough - but it's still better than most other spending... Cars, vacations, electronics etc. Those all go to zero are are consumed rapidly. At least a new kitchen, bathroom or deck is used for a long, long time and every single day. Renos are probably even better than investing for many people if they are just going to gamble it in penny stocks or bitcoin or EV startups. At least the reno will give them 40-50% back instead of nothing.

If you compare renovations to a sensible CMFer investment plan then sure it's a bad idea... But we should be comparing it to the average persons use of money which they don't have - like an iPhone on their credit card, or a new car with dealer financing... then renos don't seem so bad.
 

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Discussion Starter · #252 ·
Did you have a part in talking them into a condo building, I wonder? With your hate-on for living in blissfully quiet detached homes and the American dream? :p
Definitely not. I've never been a fan of condos.

I've been consistent in my own position, which is that I would either live in a proper (detached) house, OR a rental apartment that I can walk away from at any time.
 

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If you are good to your landlord and they are good to you renting is great. I always pay on time and respect their property as if it was my own and they've been great for me. They are always happy to look after the place if I'm gone since it is theirs. My capital does much better invested elsewhere because I can trade and diversify. No surprise property tax and insurance rate hikes.
My landlord has even approved some planters that make our large patio more esthetically pleasing.
 

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The only reasons people talk about RE being fabulous for wealth creation is (a) the massive leverage they are using, and (b) the fact it forces them to buy and hold, rather than trading in & out like they do with stocks. Something I've discussed off line with @MarcoE quite a bit.
I rented for about ten years before I bought a house. I think it depends on the type of real estate you want to live in. When I was single, a small apartment in Toronto was fine. In that case, rent made sense. If I bought a condo, I'd end up paying just as much (likely more) in mortgage interest + condo fees. Renting was easy and convenient. Especially since I moved between apartments every 2-3 years. But eventually I moved to the suburbs to raise a family, and renting a house in the suburbs is actually quite expensive -- I think that right now, to rent a nice house in Toronto's suburbs can cost you about $3,000-4,000 a month. Buying just makes a lot more sense, especially when you can get such good rates on mortgages. So it just depends on your situation.

I think when it comes to your primary residence, there are also many considerations beyond financial. Lifestyle considerations, psychological considerations, depends how long you want to live in the place (are you just hoping to live there 3 years or 30?) and so on.
 

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From what I see among friends of mine, people are spending a ton of money on these constant upgrades and renovations.

I think it's a kind of sickness that has seized the nation. It's some kind of renovation mania, where people really just want more luxuries but tell themselves that it will improve the property value.
I've owned two houses. And I noticed some interesting things about this.

My first house was only 3 years old when we moved in. It needed no work. Everything was new and shiny. We didn't have to do any maintenance or upgrades. 7 years later, we tried to sell the house. And it took a LONG time to sell. Most potential buyers turned the house down. Why? They all said the same thing: "There are no upgrades." They wanted to see an upgraded kitchen, upgraded this and that... We eventually sold the house, but without upgrades, it was an uphill battle. So there might be some merit to the idea of renovations and upgrades increasing the value of your property (only relevant if you want to sell of course.)

We then moved into a house that's 30 years old, and instantly, we noticed a difference in the maintenance required. In a house that's 30 years old, there are a lot of things that are old and breaky. Lots of things in a house need to be replaced every 10-25 years: windowsills, floors, roofs, decks and fences, brickwork on the exterior, and the list goes on.

When you buy a house, I think it's important to consider all this. I think that maintenance costs are an ongoing expense when it comes to house ownership, and something you have to budget for. Depending on your house's condition and ambitions, ongoing maintenance costs can be significant.

You do, however, have leeway when it comes to what you want to upgrade or fix. If your patio is falling apart and crumbling, you don't HAVE to upgrade it. If your yard is weedy, you don't HAVE to hire a gardener. But if your furnace breaks or your pipes burst, that's not optional. So you do have some control over what to spend and how.
 

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Plus much of the maintenance such a lawn maintenance and snow removal is often unpaid servitude that owners often bear themselves. I know a number of former owners who love the personal time they get back.
Unless you have mobility issues, those aren't a huge burden, in my experience. Gas-powered lawnmowers and snowblowers take most of the physical effort away. There are also usually teenagers in the neighborhood who'll mow your lawn or remove your snow for a small fee. I suppose it depends on the size of your property. Most real estate in my area (Toronto suburbs) is on small plots of land, where taking care of grass and snow is fairly easy, due to the small area involved. I can see it being more of a struggle in areas where houses sit on big lots.
 

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I can see it being more of a struggle in areas where houses sit on big lots.
Yes our home in Toronto was on an acreage north of Unionville and had a one acre lot and it had lots of grass and the driveway was 350 feet long so shoveling it by hand was not an option so we had to hire a service and the same with the lawn it was a lawn service that looked after it. Plus trimming all the trees and raking all the leaves. And fertilizing and trimming all the planters.

During blizzard snowfalls, I had to park at the end of the driveway because our contractor had the airport contract and couldn't guarantee being there before 8am. I also had to have boots and carry shoes. We had racoons who loved our roof and constantly had to repair the roof because they use shingles to make their winter nests.

We did look after the pool though.

I have other numerical friends who kept track of their costs too and there is no question the ongoing costs are significant. No one publishes it because the real estate, mortgage and government interests are against any adverse publicity.
 

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Owning a house in Canada makes you a tax resident, if you want to work remotely for the USA or Canadian companies and live in the country with lower taxes and warmer climates, CRA will come after you.
 

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Owning a house in Canada makes you a tax resident, if you want to work remotely for the USA or Canadian companies and live in the country with lower taxes and warmer climates, CRA will come after you.
Nope, owning a house doesn't make you a tax resident.
Maintaining a home however likely would.


 

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Nope, owning a house doesn't make you a tax resident.
Maintaining a home however likely would.


Significant residential ties with Canada include:

Secondary residential ties that may be relevant include:

  • personal property in Canada, such as a car or furniture
  • social ties in Canada, such as memberships in Canadian recreational or religious organizations
  • economic ties in Canada, such as Canadian bank accounts or credit cards
  • a Canadian driver's licence
  • a Canadian passport
  • health insurance with a Canadian province or territory
Here in Canada the meaning of home and house is used interchangeably. Go figure.
 
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