Time to switch things up a bit this week! I figured rather than talk about the normal technical financial stuff out there, I’d do a quick book review on one of my favorite financial books — The Wealthy Renter.
I’ve read MANY financial books out there and while they are mostly amazing reads, there’s just one problem — they are mostly American! Most of them throw words like “401k” or “Roth IRA”; these just means gibberish to the average Canadian! Enter Alex Avery with The Wealthy Renter — finally, something made in Canada that Canadians can relate to!
The Wealthy Renter is largely about the cult of home ownership in Canada.
Much like myself, I feel like there’s always been the lack of explaining the other side of the fence, which is RENTING a home. And I’m glad Alex decided to plead his case on that very topic!
Alex Avery is an analyst at CIBC, heading up their North American real estate research team. He lives in Toronto, in a house he owns. He’s been a landlord and a renter, but he and his wife decided to buy after they had kids. That’s right — he’s a homeowner himself! I think this is particularly why this book was such an interesting read to me, because everything in the book is coming from a man who stands on the “homeownership” side of the fence. But in the crux of it all, Alex himself said he would have been a renter if given the choice, and if he had to start all over again.
Now, Alex isn’t arguing that there’s something wrong with wanting to own a home at all. Really, one of his main points is to address the misconception that you can’t be wealthy if you decide to rent instead of own.
Have a listen at one of his interviews with Doug Hoyes from Debt Free in 30 podcast.
Who should read this book
This book is not necessarily targeted to millennials directly, but rather to young Canadians who are concerned with wealth building during these uncertain times. If you’re just beginning your financial journey, I highly recommend this book. It’s a great fun read that might give you another perspective on homeownership and whether it’s right for you or not.
3 big takeaways
1. EVEN IF YOU OWN A HOME, YOU’RE STILL PAYING RENT
Alex points out these ‘phantom costs’ associated when owning a home! The problem is that homeowners don’t have a clear idea on how much they are spending on these variable costs — things such as property tax, maintenance, insurance to name a few. Tally this all up and it’s a form of rent every month!
2. A HOUSE IS A HOME — NOT AN INVESTMENT
I’ve talked about this particular point in the past — The home you live in is NOT an asset, it’s a liability. When you buy a home, it’s a lifestyle choice. It’s never gonna pay you dividends! Because of all the additional phantom costs, it actually pays you ‘negative dividends’, hence giving you NEGATIVE CASH FLOW.
3. IF YOU DO DECIDE TO BECOME A LONG-TERM RENTER, REINVEST YOUR SAVINGS
The one strong argument for home ownership is that it’s a type of forced savings. So if you decide to become a long-term renter, you really do need to invest the difference! So if it costs you $3000 per month when buying a home, but only costs you $2000 to rent — if you’re renting, you should be saving that extra $1000 diligently every month inside a TFSA or RRSP, all while pretending that you’re paying $3000 in total! Otherwise, you’ll be hurting your chances of coming out on top when being a renter!
The Globe and Mail put out a very interesting video, running some real math & real numbers on BOTH scenarios. It’s an interesting find and is worth a watch!
“The world has changed a lot in the past twenty-five years, and even more in the past fifty years. Isn’t it time to take a look at whether the old, conventional views on housing still make sense?”
ALEX AVERY
Ironically, we went from being homeowners to renters way before I read this book! However, what it ended up doing for me is it solidified our decision EVEN MORE to become long-term renters for the foreseeable future!
