Reasons Not To Buy A House From A Millionaire Investor

Reasons Not To Buy A House From A Millionaire Investor, is a guest post by Kristy from Kristy and her husband have been all over the Canadian news recently for denouncing homeownership.

They considered buying a Toronto property in their late 20s when they realized they couldn't get anything nice for ~$500,000. Instead of buying, they saved as much as they could, rode the bull market, amassed a $1M investment portfolio, and quit their jobs to travel the world by age 31.

Given I'm pro homeownership because I'd rather be a price dictator than a price taker, I thought it'd be great to get the other perspective. Their blog is written with an irreverent flair that I enjoy.

It's one of those things that happens when you become financially independent and don't give a damn what other people think. So for those of you who are pissed off about ridiculous home prices in places like San Francisco, Honolulu, London, Sydney, Mumbai, Hong Kong, Vancouver, Toronto, and New York City, know that homeownership isn't the end all be all!

This post was originally published in 2016. I've since updated the post with charts on how the real estate market has done since. – Sam

Why I Still Won't Buy A House

When I first told my mother I was a millionaire, her response was:

“So what? You don’t even have a house.”

Didn’t matter if the houses in Toronto were unaffordable. Didn’t matter if I didn’t want to work a stressful job I hated just to pay off a massive mortgage. Didn’t matter if I have enough money to live the rest of my life with complete freedom, never having to set foot in a corporate prison again.

Without a house, I was a loser.

My parents and I barely speak anymore. Other than the occasional e-mail or phone call, we haven’t seen each other in a year. What’s the point? It’d just be the same fight every time.

My friends think I’m nuts. They think I’m anti-house for the sake of being anti-house. They think I’m having SO much fun being a contrarian.

But what they don’t see is that, as the child of Chinese immigrants, it’s sacrilegious to not buy a house. Home ownership is part of our culture. It’s part of our DNA. Financial Samurai can back me up here. In Asian cultures, paper assets aren’t real. Only things you can touch with your hands are.

So even though I knew that logic and statistics and cold hard MATH told me I was right, because of my culture I had to get disowned for believing that the purpose of money wasn’t to buy granite countertops, hardwood floors, or soaker tubs.

The purpose of money is to buy…


Time is our most precious resource. We can always make more money, but we can’t make more time.

So I decided to buy back my time. Instead of paying off a mortgage for 30 years, waiting until I was 65, only to get too sick and too bedridden to travel, I decided to build a 7-figure portfolio, live off the passive income, travel the world, volunteer for non-profits, and be an author/blogger instead.

And here’s what I’ve learned about the benefits of not owning a house and why I was willing to get disowned for it. Here are the reasons not to buy a house.

Reasons Not To Buy A House #1: You are NOBODY's bitch

When you own a property, all your money is stuck in the house and because you can’t sell a brick or window to pay off your house, you have to continue being a bitch to your boss in order to pay the mortgage, insurance, and property taxes.

And if you decide to rent your place out, you become a bitch to your tenants. Because of rental laws that somehow heavily favor deadbeat tenants who refuse to pay their rent over the property’s rightful owners, you somehow live in fear of them! After all they could take a claw hammer and destroy your life savings in an instant.

When you rent, if you don’t like your job and find a better one somewhere else, you can leave. Even if it’s in a different city. Without the house tying you down, you’re free to move anywhere for better career opportunities.

And sure, you can argue that as a renter, I can get kicked out whenever a homeowner wants to sell. BUT, as a renter, I can also take advantage of moving to “renters market” areas and take advantage of the high vacancy rates. I can also rent an apartment building, where the chances of the landlord kicking out the entire building to capitalize on the housing market is next to nil. As a renter, my choices are endless.

The last three times I’ve left my rentals, all three landlords begged me to stay. They kept throwing irresistible offers at me, like lowering my rent, and when that didn’t work, they even offered a special deal to a friend if I could recommend someone trustworthy. Guess they’ve been burned more than once.

Canada Real Estate Prices 2016
Property prices have risen way beyond the 2008-2010 financial crisis levels

Reason Not To Buy A House #2: You won’t be hit with a wealth tax

When you are a homeowner, you have to pay property taxes. And if the value of your home goes up? Even HIGHER property taxes. Oh and if out of the blue, the government decides to slap on an additional “land transfer tax” or “15% foreign ownership tax” like they did in Vancouver? Too bad, you’re paying for it.

Houses are the perfect vehicle for the government to screw you, because they know you’re landlocked and have no choice.

But when you’re an investor, you can shelter your dividend income BIG TIME! You can make up to $37k each in qualified dividend income, and pay NO taxes in retirement (since your earned income drops to 0). When you're working, you can take advantage of the lower qualified dividend tax rate.

And even if they pull a Cyprus-style wealth tax, they might get you once but after that you're going to pack up your money and ditch the country. With your house, you have no choice but get screwed year after year.

The system is designed to reward investors, and punish homeowners.

There is no wealth tax in America. But perhaps, under a Joe Biden presidency where taxes are going up, there eventually will be one.

Reasons Not To Buy A House #3: You have ALL the TIME in the world to do WHATEVER you want

When you’re a homeowner, there is always a lawn to mow, a porch to fix, a roof to re-shingle, a driveway to clear. Because let’s face it, unlike a portfolio, a house deteriorates over time and parts need to be replaced.

And hey, if you’re handy like Financial Samurai and love fixing things, great! But I’d rather use my time to travel, spend time with my family, and write the next bestseller (HA! Yeah right). Sure, I could pay a property manager and hire contractors to do all those things, but that still involves oodles and oodles of time and effort to find, vet, and manage contractors, and that is not my idea of fun.

My time is too precious to waste on home maintenance and babysitting contractors/property managers.

Reasons Not To Buy A House #4: Your assets are liquid

Stocks are easy to buy and easy to sell. Within seconds, you could be out of the market.

Not so with a house. You have no control over who moves in next-door (ever seen the movie “Neighbors?” Would YOU want frat boys moving in next to you?). If they start making your life miserable and you want out? Your house could be sitting on the market for months.

What if you bought the house at the peak and now you’re in a down market? Well, guess what? All your friends and neighbors are also trying to unload their houses, so good luck trying to get out.

Your house will be sitting on the market, while it continues to lose value, and you continue tearing your hair out. And when you do finally sell? You get slapped with another 5% in closing costs.

Why I'm not buying real estate

Reasons Not To Buy A House #5: You are diversified

With a diversified portfolio, you are hedging your risk. As stocks plummet, inversely correlated assets like bonds will rise. And if you own REITS, you can even take advantage of a rising real-estate market, without having to put everything into 1 asset.

With a house, all your wealth is stuck in 1 asset. If that falls, you’re screwed.

Reasons Not To Buy A House #6: You have no maintenance costs

It costs next to nothing to own and maintain a portfolio of low-cost Index ETFs. Maybe a $5 transaction fee here and there, and a rock-bottom 0.1% MER. But for a house the costs just never end: property taxes, insurances, maintenance, lawyer fees, and closing costs when you sell.

On the contrary, a portfolio pays YOU, not the other way around.

Reasons Not To Buy A House #7: You don't need to time the market

If you’re doing long term investing like me, you don’t have to time the market. Simply buy low cost index ETFs, and rebalance periodically. This ensures that you buy low and sell high. And with the portfolio structured to pay me enough dividends to cover my living expenses, I never have to touch the principal. This means I never have to figure out when to buy or sell. It’s a no brainer and very passive.

With housing, however, you need to time the market. You need to know when to get in, and when to get out.

US versus Canada average
The difference in US and Canada home prices is large. Is it because it is comparing median versus average? Or is something else going on?

Canadian real estate price average 41% greater than US real estate price average

Is it EVER a good idea to buy a house?

Now, before you all get out your torches and pitch-forks, let me explain. I’m not saying all houses are a bad investment…I’m just saying they’re a bad investment for MOST people.

Take Financial Samurai, for instance. If we ever opened up his laptop, I guarantee we’d find reams and reams of spreadsheets and analysis on every house he’s ever invested in. To put it mildly, the guy does his homework. 

Here’s an article detailing his insanely rigorous method of finding good tenants.

Here's another article on how to properly analyze and value an investment property.

He knows what he’s doing because he puts a ton of thought into any financial decision before pulling the trigger. Someone like him SHOULD be investing in real estate.

The average real estate “investor”? Not so much. Armed with the knowledge that “houses always go up” and that “rent is throwing money away,” they just put in a bid after a 10-minute inspection. That can get you into a lot of trouble, as a reader on my blog recently learned when they bought a luxury condo in Edmonton, Alberta right before oil crashed 70% in value.

Buy A House If You Carefully Run The Numbers

So if you live and breathe numbers, know how to read a US Treasury yield curve, and like spending your time doing house maintenance, I’d say housing is a good bet for you.

But if you’re dumb and lazy like me and would rather spend your time traveling and doing what you love, renting and index investing is a better way to go.

Even if you get disowned for it.

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Fundrise Due Diligence Funnel
Less than 5% of the real estate deals shown gets through the Fundrise funnel

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Update 2021: Looking Back On Real Estate Over The Past Five Years

Since publishing this post in 2016, housing prices have soared in Canada, especially during the global pandemic. Big city real estate is heating up and people are also buying rental properties for income.

Thankfully, the stock market has also done great since 2016 as well. Therefore, Kristy is doing well too. However, in retrospect, it Kristy would have built more wealth if she had bought real estate in 2016 thanks to leverage.

Being a millionaire requires saving and long-term investing. I think people should get neutral real estate by buying their primary residence at the very least.

Because Kristy and Bryce are still so against owning real estate, I thought I'd do a good thought experiment in my latest post: What If The U.S. Housing Market Got As Hot As The Canadian Housing Market

About The Author

196 thoughts on “Reasons Not To Buy A House From A Millionaire Investor”

  1. Great article! I had come across Kristy’s story once before on the news but couldn’t recall her name but now I can check out her blog. I think personal finances are just that: personal. If Kristy and her husband can afford live in a way that’s different than how you or I want to live, that’s perfectly fine. No need to cram homeownership down on someone who doesn’t want it and has the ability to generate wealth in their own way. We’re not all the same underneath it all…and that’s ok! Doesn’t mean we don’t have the right to exist for not having the same life goals or that only your life is valid. I myself have moved about 7 times in the last 10 years and am planning another move after the pandemic. I also don’t want to have kids. My finances and what I want out of life are going to be very different than what a married couple with 2 kids and a dog is going to be like.

    1. Thanks. I think in retrospect though, it would have been great if they bought Vancouver or Toronto property back then as prices have done extremely well since.

      That said, they still don’t have kids. So living lightly is nice!

      1. If they end up choosing not to have kids in the end, well then there’s less of a need to create generational wealth haha. Buying a house due to societal pressure and hating every minute of it still counts as a regret in my book so I’m glad they are able to live life on their own terms and it inspires me to do the same

  2. One thing that was not mentioned about renting….Lock and leave. I never had such luxury living in my lakefront home. Instead, I was met with thousands upon thousands of maintenance costs and nightmare experiences that never ended with contractors. And yes, cheap appliances and whatnot can be a downside of renting, though it depends on what you’re renting. Renting in a posh high rise will give you the same quality appliances as if you owned one of the units, and you get all of the amenities as owning. Traveling is a breeze too; especially to five star hotels at the top suites that you can enjoy from all the savings of not spending on home maintenance. Sure, you’re paying for the taxes in renting, though what the closers for a home don’t tell you is all you will be spending on replacing appliances, hvacs, roofs, windows, water heaters, floors, painting, and that’s if you don’t do any renovating! How about sidewalk repair, lawn irrigation and gardeners and aborists? How about a $500 bill to clean your home (and that was 2006). I wish I was making all this up…Just a sample of one year of my home ownership in Dallas, TX.

    1. True, there are a lot of hidden costs to homeownership that no one tells you up front. Realtors will never go into them with you and other people just hand wave them away. But they do eat into your appreciation and because they are unexpected, they are always a nasty surprise compared to a straightforward rise in rent that you can account and adjust for (or move to a new place). Not to mention all the time you spend constantly fixing the thing or looking for a decent contractor that will do it for you. A managed apartment on the other hand can send in maintenance within 24 hours and you don’t even have to at home for them to come in and fix your issues.

  3. The blogger kid is conflating LBYM lifestyle with home ownership. Thinks he’s no one’s bitch? Wrong. What the blogger kid gets wrong is that he’s still paying rent. He is his landlord’s bitch unless he lives at home with parents.

    Further, if you’re ever f’d (laid off, injured, etc) you will be evicted in 2 months, as a renter
    With a mortgage, it can take YEARS to get evicted. I know people who defaulted on their mortgage, and lived for free for about 5 years (and banked all the cash) Owning is MUCH safer.

    Blogger kid gets this totally wrong.

    1. What family? they disowned you didn’t they? Having a home let’s you live another dream. Sometimes people want to settle down and create something like a family. At least you volunteer and don’t live completely selfishly though.

  4. We don’t rent or own. We found living inside walls to be suffocating to life. They completely shelter and take one away from the beauty of the world. Amazing that for a lot of people the only time they are outside is to walk to their front door of work, they live completely disengaged from nature, getting only artificial light.

    So, we dont own or rent, we got a van! We don’t even have to try to save money, it’s just too easy to save. We take on meaningfull contract work that we decide to do when we want to and do whatever else we want the rest of the time.

    We don’t wait for ‘vacation time’, we give it to ourselves when we want, whenever we want. It is so liberating.

    Society is under a spell that you need walls to live in, a shower every single day with toxic chemical water, and using gallons of water just to empty ones bowels. Its amazing how little water one needs to brush teeth, yet so many people waste tons out of a faucet.

    I’ve found I can comfortably eat on $5 a day (natural foods) and we found it liberated ourselves from over eating like most of America. We live in places humans are supposed to inhabit with comfortable temperatures, no need for Air conditioning or heat constantly. Best shape of my life, run everyday, cut up abs, good stuff!

    If you think about it, most stuff people do is just a waste of time. There are important jobs but they truly are far and few in between and don’t pay their true worth to society.

    In America hard work doesn’t pay. Wealth is accumulated by taking advantage of others, doesn’t sound nice but think about it, it’s the truth. Besides the government printing presses, one cannot create wealth but rather take it away from others. Why do you think the 1% keep getting richer?…

    So do yourself a favor, reject society ‘norms’ reject everything you “think” you need to live. All you need is water and a little food (a lot less than you think) and your life will continue on regardless of your finances, fancy cars and fancy houses.

    Philosophical tid bit *
    Everything you see around you is imagination of the human mind, even the words on this electronic page are just squiggles, it’s a conspiracy between you and me that I created these words from my mind and you are reading the words and creating their meaning.
    Search for Sadhguru *warning: life altering events may occur once you see the matrix from the outside*

    Remember, You’ll be DEAD a LONG TIME, so live it up folks!! Don’t let the worms have all the fun!!!!

    1. Josh Rachlis

      This is exactly the kind of post I’ve been looking for. I’m thinking of selling my 2-bedroom condo in downtown Toronto so I can be free to travel around interviewing people for my YouTube channel. So many people keep telling me I should never sell the property. I would love to interview you about your lifestyle to help confirm my desire for freedom.

    2. Oh you your so wise. Blessed with the wisdom too see through the illusion cast on the rest of society…..bit do tell me, how do you raise children in a van?

  5. Agreed that buying a home can be a very tricky decision that is easily rigged in favor of everybody else. And I always loved the idea of stocks over a house mortgage. In fact, I too ditched my home and did the rental thing. Sounded great, loved my 18 months at it.

    Except you can’t live in a stock portfolio.

    That became very clear to me when my landlord went bait and switch on me — rent prices went up 10% at renewal time! The front office staff said “this place is owned by a big corporation, there is no negotiating. They like to get people in here on low prices, then figure you don’ want to move again — so they jack it up a renewal time.”

    Being someone’s bitch? = being forced out of your home by higher rents or even just because someone wants their property back.

    So I went the middle ground and bought a home — but the smallest one I could shoehorn myself into in order to reduce maintenance and financial risk. And a monthly mortgage that will never increase.

    Good move too. Even though it was a very tricky purchase, it finally worked out. Just a year later, there was a flood in my area that took out 40,000 homes for a year —

    Now people are begging for rentals. I was able to move in with a friend for awhile and rent out my condo for 9 months to a flood victim family who lost almost everything.

    In other words, my property is easily converted to a cash-producing asset. And here is little hassle. I can ask the condo staff here to do the rental management for me, if I don’t mind paying a small fee.

    And I can still travel around. I can sell my property if I want to. Nothing sits on the market forever, most homes in my price range ($100-$150) sell within 30 days.

    Also, there are protections in the law in the US re: home ownership. Home value isn’t figured into things like assets counted toward nursing home medicaid eligibility. No one can kick you out of your home unless you don’t pay your taxes of course. My taxes each year are around $450. I think I’m good.

    You might want to rethink your home ownership strategy — renting is great, and I loved it. But it came with a very high price tag.

  6. Can someone explain this part from Benefit #2 a little bit more clearly? How can you pay NO taxes on your dividends?

    Re: Benefit #2

    “But when you’re an investor, you can shelter your dividend income BIG TIME! You can make up to $37k each in qualified dividend income, and pay NO taxes in retirement (since your earned income drops to 0).”

    1. Qualified dividends are taxed at the capital gains tax rate, not as income tax. You can read more by googling “qualified dividends” for more. The lowest tax bracket for capital gains is 0%.

      Good question. I didn’t know until I looked up the answer.

  7. I am a homeowner and I don’t think renting is a big deal. We only bought a house because we wanted a family, and raising a family in a house helps keep the peace. I suppose we could have rented a house where we live instead, but rents are high where we live, and the price to buy a house in the Nashville, TN area seems to go up, incessantly and without reason.

    When I met my now wife, I advised her not to bother buying a house in 2005. I had no magic lens, logic just told me that housing prices could not go past wage increases forever. The math didn’t work and homes weren’t historically fast rising assets. I also heard the same stories everyone else heard, anybody could buy a house with an interest only ARM. Ummm, why would anyone think this wouldn’t lead to a crash? Hello, that wasn’t rocket science.

    Congrats on your lack of home-ownership, I always enjoyed the apartments I rented.

  8. You’re absolutely right that having a home makes you a target for the government to take some of your money. Of course, if you rent you end up in the same issue since as a renter you’ll pay property taxes too – they’re just included in the rent. I guess the best thing would be to just travel in a motor home or something, or move to a place with low property taxes and move if they raise them.

    1. Jusy because you are paying a 30 year mortgage doesn’t mean you have to be enslaved for 30 years to a home. Average time in a house is about 5 years. I know people who sell their house in two years and move on. Put enough principal and equity into it and you can maybe profit in a short time. Buying a home doesn’t have to stop you from traveling either. If you bought a piece of crap home that needs tons of repairs and renovations or maybe decided to go with a huge yard or even buy too big of a house… yeah you wont have time for much. If you go more on yhe new side or find something that at least has been taken well care of by the previous owners, then going out and doing what you love shouldn’t be a problem. Homeownership comes with work no matter what. As rent keeps going up, think about it: you could be putting that money towards something and be making an investment. You don’t want to live there anymore and can’t sell or dont want to do away, then rent it out to really good tenants you trust. You can actually rent out the house a little higher than you mortgage in most cases. All their money takes care of the mortgage and you can live your life somewhere else. Homeownership isn’t a bad deal. It’s more of are you willing to make the commitment towards what can be a good investment, rather than throwing your money away.

  9. Great fricken article. I’m currently in finance and I’ve been using my commission based job as a means to accumulate wealth at a rapid pace. Once I hit that 7 figure net worth, I’m going to seriously consider getting out of the mortgage business. I do like making tons of money, so we’ll see how I feel when I get there.

    People always ask me why I don’t want to buy a house or why I haven’t purchased one yet. This article sums up my feelings exactly. People seem to be really offended when you disregard homeownership in a such a manner.

    I’m all about that liquid wealth.

    A close friend of mine, who is a very important part of the company I work at, once said to me that he himself hates mortgages, but loves people who have them. That way he can keep them working for him forever!

  10. Home ownership can be a great investment if you live in an area where there are boom and bust cycles like you find in the stock market, as long as you get the timing fairly close to being right. A friend of mine has timed the market well a couple times out in San Francisco.

    But, in areas where the rate of appreciation is basically tied to inflation, if that, then you may actually be losing money due to the amount of maintenance a home requires.

    On the other hand, those tax deductions are a huge enticement to purchasing a home just about anywhere.

    Ultimately, this article makes some good points. I am more aligned with the authors because I like the stock market as a vehicle for building wealth better than real estate. Real estate is just a lot more work.

  11. David Wendelken

    A family income of $43,000 in the USA would put them into the 40th percentile of income.
    That means that they would have an income higher than 40% of the families in the country without doing a lick of work at all.

    A stock portfolio of $1,000,000 should be able to reasonably safely toss out an income of $40,000 a year based on historical averages. An ultra-save withdrawal rate of 3.5% instead of 4% would still bring in an income of $35,000.

    That’s pretty awesome.

    If they stay in an income producing activity for a few more years, they could easily grow that $1,000,000 into a much larger number very quickly. If they never saved another penny and just let that money grow it should compound to around $2,000,000 in about 10 years. That would produce an income of $70,000 to $80,000 at the 3.5 to 4% safe withdrawal rates.

    This couple is only a few years away from being set for life. Or, if they live very frugally, they already are.

    Bravo to them!

    And, if they decided to buy a house in a low cost of living area, they could probably pay cash for it in a year or two, depending on what their income is. At that point, their income would be plenty.

  12. I’d just like to say that I saw your original article on CBC and I completely agree with your life decisions! I am a bit jealous, I have to admit. ;)

    I currently live in Toronto, never intend to buy a home anywhere, and I am saving up for Financial Independence. I’m not in a huge rush, but I’m aiming for retiring before 45 (which is still another 18 years). Location independence and travelling are huge for me as my partner especially as our families are far away. I would be surprised if we stay in Toronto until we reach Financial Independence, but never say never!

    Keep it up, and I will be following your blog from now on.

  13. I’m sorry to hear how the housing issue escalated so much with your parents. I’m sure the cultural quirks make it especially difficult. But I’m glad that you persevered and did what was right for you, and not what people wanted you to do. :)

    We just bought our first house a few weeks ago. We did the math and, compared to rental rates in our area, home ownership is more financially sound. It really does depend on your personality, goals, and where you live. For us, having a garden and yard and less neighbors are extremely important, so a house was the right move for us.

    But I don’t think it’s right that home ownership is the default sign of being a put-together adult. It’s ridiculous to shackle yourself to a piece of property to pay it all off in 30 years. For us, our plan is to pay off the house in 5-7 years, all thanks to our 50% savings rate. :)

  14. “Benefit #2: You won’t be hit with a wealth tax

    When you are a homeowner, you have to pay property taxes. And if the value of your home goes up? Even HIGHER property taxes.”

    Who do you think ultimately pays the property taxes on the rental property. You, the renter. It’s a pass-through expense.

  15. “Instead of paying off a mortgage for 30 years, waiting until I was 65, only to get too sick and too bedridden to travel, I decided to build a 7-figure portfolio” Because these are the only 2 options a person has in life… A bit extreme much? We have a mortgage, on schedule to pay it off in 10 years; yes, we have 9-5 jobs, but we manage to do quite a bit of travelling with 2 small children while also saving for early retirement. We live blocks from the beach. Last week my husband came home and while the grandparents were watching the kids, we went to have wine and watch the full moon. Not complaining about my mortgage or lifestyle, since I live where other people go on vacation. There are options, just sayin’.

  16. My mom always used to say “you can’t live in your stocks”. Glad I went against the grain and lived in a small place and kept investing in stocks.

    Retired at 36, enjoying life now.

  17. Great article! While I agree with certain points and disagree with others, we are certainly in full agreement over the fact that having income-producing assets is superior in every way to working. My job is stressful too, and I’d rather take on the “risks” of a diversified dividend growth stock portfolio funding my expenses than the real risk of pay cuts, termination, and lifelong stress.

    People were earlier talking about how dangerous for someone in their 30’s to be living off a stock portfolio. But if you have a diversified dividend stock portfolio spread out across a variety of sectors and industries, the possibility of losing ALL your dividends is extremely small. I can’t imagine what would have to happen for all the major corporations of the West to suffer such hardship. But a job? Come work at a bank; I’ll show you all the different ways to get fired on the spot that don’t include stealing from the vault or opening fake accounts like one of the 5,300 ex-Wells Fargo employees. Or just don’t make your numbers. Haven’t sold enough credit cards lately? Bye.

    As for living arrangements, I think it really is a matter of life experience and lifestyle choice, but I think both renting and traditional homeownership are awful ways to go. I’d rather own a multi-unit property, live in one of the units, and rent out the rest. This way your home pays for itself! And you are on site to manage any problems (of course, I imagine that the mice WON’T play since the cat’s not away). Even a shortfall each month couldn’t possibly be more than the full force of monthly rent/mortgage payments.

    Hope you and your family get over your differences. That sort of thinking on their part will keep their bank accounts low and their relationships strained.

    ARB–Angry Retail Banker

  18. #1) Uh, what? I can’t say I am aware of chronic bitchiness on either side of the renter/homeowner equation. Sure specific situations wind up that way, but the renter winds up being the bitch just as often as the homeowner, if not more often.

    #2) Is there some law in Canada that no one will raise taxes on other sorts of assets? Wealth taxes can hit any investment, especially over the 60 years or so you will hopefully keep living.

    #3) Maintenance has you down? It isn’t that bad:
    “a lawn to mow” xeriscape.
    “a porch to fix” hire someone. You’ll probably spend as much time on the phone with a contractor as you would with a landlord/property manager.
    “a roof to re-shingle” find a roofer, it isn’t that hard especially in the age of google.
    “a driveway to clear” I think you are confusing “renter/homeowner” with “multi/single family” arguments.

    #4, 5, 6) These are arguments for why you shouldn’t consider your home the same as you do other investments. They are true drawbacks, but there are drawbacks to every investment option. If you don’t realize the pros and cons of each then you should question your investment strategy.

    #7) Sorry, this is a nonsensical argument. You are comparing long term holding of stocks to short term selling a house. Once again it is something to keep in mind when making investment decisions, but many, if not most, people buy houses because they plan to live in them for a while. It isn’t about timing the absolute highs and lows of the market any more than when you buy stocks for the long haul.

    I’m not even sure why this is a thing. It’s like arguing over the size of the emergency fund. The argument is if it makes sense for a person with a limited portfolio should buy a house, how much s/he should spend, and if it should be considered shelter or an investment. I think considering your primary home an investment is a bad idea (unless you are actually a real estate investor: rehabbing or reducing living expenses by living in an investment property). But I think owning your own home is a good idea as a hedge against inflation. Once my home is paid off my expenses are very stable. At that point I am far more comfortable with risk to the rest of my portfolio because I know my home is paid for. If something happens in the area I live in, like property taxes going through the roof, it’s likely that I can trade my home, for a modest fee, for a similarly priced house somewhere similar (i.e. change neighborhood/city/state). I admit this isn’t universal as if you did so in Detroit 20 years ago you’d be really stuck.

    While this is academic as I assume the author is invested in REITs, in a similar position I would simply find a modest single family home I found acceptable in a strong rental area and hand it over to a property manager. I’d have my house, should I ever want it, and I would have the freedom to rent. Plenty of landlords rent their own residence. Voila, the stability of ownership with the freedom of renting. Yes there are drawbacks to this plan, but didn’t I point out there are drawbacks to any investment plan?

  19. I don’t think it always makes sense to be “anti-home owner”. I think a lot of this depends on the region you live in. For example, here in Vermont, rent for a good 2 bedroom apartment is $1,300-1,500/mo. While you can get a 3 BR/2 BA property (30 yr fixed), 20% down for about $800/mo. Here in Vermont, it makes sense to buy a home. However, if you’re in the Midwest and your rent is closer to mortgage payment costs, then renting makes more sense.

    1. Man, I’ve never read someone using the Midwest as an example of an expensive place where renting makes more sense! My mind is kinda blown right now! :)

      This is why I blog. To gain new perspectives and not be delusional that there are many other great places to live.

      1. Lol. I’m sorry, I didn’t mean for anyone to take me saying the Midwest is expensive. Just the opposite. I used to live in Cincinnati. Because rent is much more reasonable there, it makes more sense to rent in lieu of buying a home. Here in Vermont, it’s the opposite. Because rent is almost twice as high as Cincinnati, it makes more sense to buy a home.

        1. I live (rent) in the Chicago suburbs, but come from Western NY. It is expensive in this part of the Midwest, because there are still good jobs here.

  20. I don’t think $1 million is enough to retire in your 30’s. I would try to double it first, before giving up your careers. But I agree about investing in a personal home, it is really just speculation for most people.

    I have lived in Canada, Australia, and the US. Canada and Australia are in huge housing bubbles.
    Some of it is caused by smaller gini coefficients, poorer people in Canada/Australia are quite well off compared to poorer Americans. So historically there was more competition from different segments of society for homes.
    Other causes include heavy regulation and larger union presence, building is far more expensive.
    Lower property taxes than the US. Property taxes tend to help stop property bubble speculation, just look at prop 13 impact on California compared to the rest of the US.
    The smallest impact that sensationalist media loves to blame is Chinese money. Yes, Chinese money comes into Canada and Australia, but it also comes into the UK and the US. Since Asian migrants are typically middle to upper class and aren’t causing crimes, poorer people need to come up with other reasons to hate them. House prices!

    1. Yeah, I agree with the retirement figure. Further, the “I am a Millionaire” is somewhat misleading as, if you read her blog, its 1 million between her and her husband, NOT 1 Million in personal net worth. Will dividends and side gigs cover the expenses when children come into the picture? Even during a bear market/recession?

      I actually think the property bubble in Australia is due to lax credit standards. It is typical to hear of 26 year olds with $1 million + mortgages earning 75k.

      Lets do the math:
      75,000 = take home pay of 57,000 according to:

      4% of 1 mil = 40,000

      so 70% of take home pay goes to interest payment ALONE.

      There is a culture there of property speculation that is reinforced and encouraged in government legislature with negative gearing.

  21. Curiousgeorge

    What if there is a 30-40% correction and your 1 million goes down to 600-700K? If you are in your 70s-80s maybe a million will do. 2 people in 30s wanting to living off a million for the rest of their life in the US is very difficult(not impossible). 5 million, doable and 10 million is ideal. I admire your courage in doing what you are doing and wish you good luck.

    Do you have rich parents you can come back to if anything goes wrong?

    1. FIRECracker

      A 60/40 portfolio corrected 25% during 2008. And the interesting fact is that during this time, dividends and fixed income were still paid out. So if that happens, I would continue to live off the dividends. I also have a cash cushion covering 3-5 years of living costs.

      Thinking that you need 5 million or 10 million to retire is way too conservative, considering that the average retiree household in Canada has an income of 42K. If you’re spending is 200K/year or 400K/year, then I agree you would need 5 to 10 mill, but there’s NO WAY I would EVER spend that much money. I guess it depends on what type of lifestyle you want to live. I’m not a very picky person so my portfolio is enough for me. For other people, it may not be.

      And thanks! I would never rely on my parents for a back up plan. I like being independent :) That’s why I paid my own university tuition without their help.

      People forget that one of the biggest advantages to retiring young is that you can easily pick up a side gig or too. Since I have writing and coding skills, I can easily make money freelancing if I wanted to. The point of retiring young isn’t so you never work again. It’s to give you the option to work as little as you want.

      1. Well you have your blog which will generate passive income. Congratulations, you are set for life:)

  22. I never imagined taxes can be so big in other countries. In Romania 95% are homeowners. The rent is usually simillar to the morgage rate. Taxes for a house are about 0.1-0.05% per year. We use Robor + x(a margin usually of 2-3%)

  23. Answer
    1)Why is Canadian real estate so much more expensive than US real estate?

    Calgary and cdn oil industry areas’ real estate are vibrant due to the oil discoveries. Vancouver real estate is forced up by overseas buyers. Toronto real estate is constantly changing hands. A lot of the time prices rise due to a new overseas buyer. If you’re in Chinese speaking only circles in Toronto from overseas then you would know what I’m about to say. Kids of China’s politicians can afford the best, most expensive real estate (not to forget drive bmw, Mercedes) when they are in Toronto for a minimum of 4 years university. The parents tend to buy outright the real estate property. How are China politicians so much richer than many China businessmen? I think you all reading this know the answer too. The politician’s kid(s) enjoy the fruits of their parent’s stealing and corruption living luxuriously in Toronto.

    4)”is it the desire to live in a nicer place has faded for the desire to be more mobile and free”
    So I live in Toronto a couple year, another small cdn city for a couple years and there were a couple years time when I had BOTH a semi in Toronto and a small house in a small cdn city and I commuted and lived back and forth for different work reasons and requirements.

    And during this time I noticed ZERO difference between the much nicer Toronto and the small cdn city. It made NO difference to me whatsoever-at-all because my 7 day routine consist of work, sleep, buy groceries quickly, attend meetings, coffees meetings, group restaurant meetings. No playing sports, no going to concerts, no going on a boat and sailing rivers, no hiking, not much shopping for frivolous items. Sure when I pause to actually look upwards in Toronto I see the newest, largest skyscrapers and universities architectures where my small city has dated, old short buildings and dull, unmodern university architecture. Toronto has 100s of new coffees and restaurants and I can’t keep track of the openings and closings of them, but I tend to eat at the same few fabulous restaurants and coffees in my small city while avoiding the mediocre not my taste rest of them. Toronto has festivals, fun events, loud and colorful something guaranteed going on weekly with big drawn crowds and my small city has a few summer only celebrations but do I go to these Toronto socializing venues? No. I have to work always anyways so it doesn’t matter to me.

    1. Thanks for your thoughts Simon. I hope you don’t have to work always forever. That’s kind of the main point of Financial Samurai, to be able to reach financial independence sooner so one doesn’t have to always work forever!

      Some can do so w/ the help of real estate, and some shun it. Hence this post.

  24. 1. as a millionaire these days you’re not actually that rich (especially if you’re only 31). It does all depend where you want to live and what you want to do for the next 50 or so years, but if that’s going to be in the first world then it’s just not enough.
    2. if you’re going to have any kids then you probably want to be living in one place for a while and if you’re going to do that then buying a place, at least for that 15-20 year period is probably going to be better than renting. Again, it all depends where you are of course but I’d want to give my kids the best chance in life so I’m not going to sabotage their future by going off the grid.
    3. it’s true that a lot of property is very highly priced and can also represent a level of commitment and responsibility which is hard to take for some people but it’s an important part of a balanced portfolio which spreads risk.

    1. FIRECracker

      Valid points, but….

      1) You’re assuming a very inflexible person that absolutely HAS to live in an expensive city. There are many cities in Canada, where the cost of living is very low. Also, the 4% from the $1 Million is tax-free since investments are taxed favourably, unlike earned income.

      Another thing to consider is how much your expenses DROP after no longer having to work (no more daily commute, dry cleaning, professional clothing, etc), that’s why the average Canadian retiree household income is $42,000 ) and they are doing just fine. And since we are young and have writing and coding skills, it’s very easy to pick up freelance work, here and there whenever we feel like it. In fact, Financial Samurai actually made MORE money after leaving the workforce. Retiring young doesn’t mean never working again. It just means you have the options to work as little as you want.

      2) If I have kids, I will get a $6000/year childcare credit from the government. Also, by not having to work anymore, I don’t have to outsource childcare (which costs as much as $1200 to $1800/month per child). People forget that most of the cost of raising is child is childcare costs that you pay in order to be able to work.

      3) You can include housing as part of a portfolio with REITs.

      1. Why do people refer to kids as commodities? Children are little people with a huge disadvantage…Being born to suffer where they had no choice to be born. I am in my 60s, a retired professional nurse and it pangs me to know how much my son suffers, even though I provide well for him. If I had it to do again, I would have zero children! Stop the pain!

  25. I have been renting and have never bought a home yet due to life circumstances. My big issue with renting, which have not been brought up yet, is the cheap appliances and furnishings you are stuck with. Crappy coil stove which takes for ever to heat up…check, rough carpets… Check…dishwasher that washes only clean plates…check…the list goes on. I am sick of it. Barring expensive cities like SF, NYC, most places in the US offers very affordable housing. Just buy within your means and move to someplace more affordable. The US is a very very big country. You might be screwed if you are Canada however. Somepeople are happy living out of a backpack. I for one, need a ” home base” with all my goodies to feel safe in life Hopefully someday I will be able to buy an affordable house, pay it off in under 10yrs and retire.

    1. FIRECracker

      The less flexible you are (need fancy things, need to be in a certain area, etc), the bigger the portfolio you need to retire. In my case, giving up on some fancy things is worth not having to work another 10 years in a job I hate. But that’s just me.

      Everyone has their own path. If you prefer to work longer to build up a bigger portfolio and buy a nice house, that’s fine too. Do whatever makes you happy and makes sense to you.

  26. ronnie james

    guess the people that bought in the bay area in the 60s and 70s didn’t do too well. i love articles like this. forwarded it to my renters.

  27. Interesting perspective, just a few points.

    “Benefit #1 you aren’t someone’s bitch” You are only someone’s “bitch” when you allow that to be the case. This is a very dim view of working with others and employment in general. Also, not all my money was ever stuck in the house. People who overextend themselves and are house poor have that issue, they took a risk to purchase something they wanted and may or may not pay off for them. But while many may complain, I doubt most are actually house poor and most are, or should be capable of, investing in other things.

    “Benefit #2 hit with a wealth tax” Uh… those taxes, or similar ones, will hit landlords as well, which will result in higher rents even if those are delayed a bit. Why would you think otherwise?

    “Benefit #3 lots of free time” This is more a personal preference. Yes it can be a pain to have to mow a lawn or do some home maintenance or otherwise have to deal with a house issue. But this is a bit overblown. If you’re the kind of person who is always on the go, you’ll be that way if you own a home or not, and if you are not inclined to do that work, well maybe home ownership should include someone doing that stuff for you.

    “Benefit #4 and Benefit #5 liquidity and diversification” Goes back to the assumption all your assets are tied up in the home and you invest in nothing else. Not necessarily true for the bulk of home owners in my experience.

    “Benefit #6 maintenance costs” Uh…no, as if that isn’t counted in your rent by the landlord so he can make a profit?

    “Benefit #7 market timing” You don’t have to time the market for your home necessarily either. If you make a good buy, and the local region craps out, you only suffer an actual loss if you have to sell the property. Otherwise, chances are in most areas that prices will come back some and over time, even if you take a loss, it won’t be catastrophic or you can find ways to mitigate it. Hey, JUST LIKE EQUITIES AND MOST INVESTMENTS! Go figure. People who get hurt are those who have no choice but to sell when the market is down and take the loss.

    Sorry your parents are on you about renting versus buying. It probably also stems from the idea that if you buy, in their eyes you are settling down and they can expect grandkids, which is likely another pressure point from parents (mine were nagging shortly after I got married).

    I would like to point out that the biggest plus you point out is the ability to “flee” due to bad neighbors, bad job, etc. However, the actual statistics are that the bulk of people will live, work, and die within 50 miles of where they were born. I think it’s something like 80%. Also, for those that move, I see people only actually moving large distances once or twice in a career, particularly when they have family. I can say the bulk of my friends and their family this is the pattern. Someone moving every couple of years is still a rarity. So selling a home and moving isn’t such a restriction if you only do it a few times in your life. This also applies to being able to move to a lower cost of living area.

    For me, I’m an advocate of doing what works for you and there is no one size fits all because people all want different things in different measures.

    1. FIRECracker

      Very good points. The points reflect my personal experience so they may not apply to everyone (eg. Being someone’s bitch was a huge problem me because I had a super stressful job that was unstable.)

      And I think you are right about the “house=settling down” in the eyes of parents. Did the pressure from your parents actually cause you to have kids though? I have a friend who ended up marrying and having kids just to appease her mom. Didn’t quite work out the way she’d imagined. The mom stopped nagging her about having kids and started nagging her about not being promoted into management at work. So the nagging never stops no matter what you do. Now she’s maintaining some distance from her mom and it’s better for their relationship.

  28. Great post! I however don’t think this matter is big enough to stop seeing your parents. You should consider spending some of that time that is so precious with them. I can understand the need to forgo owning a house for all the reasons she listed. I Purchased half a house in Los Angeles with a friend when the real estate market was down. Fast forward 20 years and several houses later, we decided to move out of the states. We ended up selling our primary house. We kept one house and one condo for passive income which funds a big chunk of our travels around Europe along with the profit from the sales. This will be enough to last us till we start drawing from the 401k and SS further on down the line. We in turn rent and live in a low cost area of Spain. We like the freedom of being able to up and move anytime we want and would never consider buying here, even with the low prices. I think buying makes sense if you are in a place like S.F or L.A as the property prices tend to rise more often than not. We lived in Houston before moving. The profit wasn’t as high because the prices there generally stay flat. Seriously, we haven’t been lucky landlords, but the profit outweighs the losses so we will keep going like this. If l had to do it all over again, l would have kept one of my houses in L.A as well and rented it out. I think we all need to find what works best for us, and then act on that. For her, it’s no real estate. For me, l would never have been able to voluntarily stop working at 49 without real estate. Good luck!

    1. That’s awesome you moved to Spain to live a different lifestyle! So wonderful! I’m glad real estate helped you get there. It certainly gave me more confidence to leave my job in 2012 b/c of the rental income. And worst case, the mortgage was so cheap due to a refinance I could live in it for a long time w/out drawing principal after owning it for 8 years then.

    2. FIRECracker

      I agree. I have faith that we will reconcile. Sometimes you just need some distance to work things out.

      Glad that real-estate worked out for you and funded your travels! Seems like you are living a great life and I’m happy for you.

  29. I’m sorry those close to you rejected your notion and reasoning for not owning a home. For many, different is wrong and they are quick to judge/criticize if you want to spend your money or live a different lifestyle than the norms they are accustomed to. If you have no desire to own a home, pay taxes, insurance, maintenance, or be someones bitch(Stealing your words). Then who cares! That’s whats best for your life. Me personally, I want to own a home for my family to grow up in and share together. But that doesn’t mean you, someone who buys a tiny home, rents their whole life, or decides to buy a house boat are wrong for making that decision as long as it is best for them. People spend too much time worrying about everyone elses life and not their own (Can you tell I deal with this in different areas of finance).

    There are definitely a lot of cons to home ownership and you highlighted a lot of them. My real estate market is not as hot as yours in Canada, and if home prices were surging like that then I may have a different answer about home ownership.

    Thanks for taking the time to share your story and experiences. Have a great day!

    Bert, One of the Dividend Diplomats

    1. FIRECracker

      Well said! We should choose the path that’s best for us. One size doesn’t fit all.

      I agree that people spend too much time worry about everyone else’s life. If you’re truly happy, you won’t care what everyone else is doing or that you’re missing out. You’ll be too busy living your awesome life!

  30. Not all Million Dollars are the same. The best million dollars is the one you don’t have to put in more money to keep it.

    Housing is a consumption, rent or “owned”. A house has huge ongoing maintenance costs, it is a liability to you. You keep paying taxes on “your house”, but you don’t “own” it, the government does, why? Your house generates money for them(gov). When house prices go hyperbolic they(gov) are pleased because they can tax you more.

    That said, I am not saying people should not own houses.

    1. I keep hearing this “huge ongoing maintenance costs”, taxes, etc. but that, like so many things, is situational. Housing is a long play, after about 10 years in my four bedroom home my mortgage, maintenance budget, taxes, and insurance costs were about the same as renting a two bedroom apartment locally and now, 15 years later, they are less. Does that involve some sweat equity? Sure, but not killer amounts. Yes, a house can have expensive outlays, like a new roof or new heating system etc. but that’s part of the budget amount people should be putting aside and not neglecting.

      Housing will cost you, whether you rent or own. The government gets their cut, from the landlord or the homeowner regardless so don’t fool yourself into thinking you don’t pay for that in your rent.

    2. May I ask whether you are a property owner? The property taxes, maintenance, and insurance are ongoing for sure.

      We can take the whole argument out even further by asking: do we really own ANYTHING in this world? Or are we all just temporary renters since we don’t live forever?

      1. My view is that if a “thing” costs cash out of your pocket after expenses, it is a liability. So a home is a liability.

        I started investing in single family houses 30 years ago, when I very young. So I am an experienced landlord. Yes, I own SFH, but I do not want to own any, is this contradictory?

        1. Makes sense to me. That’s the beauty of the market and the opportunities today. Something for everyone.

          What was the main way in which you built your wealth (net worth breakdown by asset class) and are you currently retired now?

    3. Don’t disagree with you but the costs for renting will likely be far higher. Where I’m at, even putting just 5% down and getting a 15 yr mortgage has ~ the same monthly cost as renting does, but you’re building $1k/month in equity with the mortgage (and increasing each year). The real reason renting makes more sense sometimes than owning is mobility and diversification of assets. For me – my primary home (net of mortgage) only makes up about 10% of my net worth so no real reason to worry about diversification

  31. OlderAndWiser

    Fact check: It doesn’t sound like you got disowned. If anything, it sounds like you disowned your parents (though if you are still in occasional contact with them, that didn’t happen either). But of course using the word “disowned” makes for a more provocative and sensational headline, even if it does not reflect the facts, so I guess you met your objective.

    Very unfortunate that you would chose not to associate with family simply because your views do not align. You say you value time. The time remaining that you can spend with your parents is finite. “For what shall it profit a man, if he shall gain the whole world, and lose his soul?”

  32. Isn’t the mortgage interest in Canada not tax deductible as in the U.S.? It’s easier to justify buying a house with a large mortgage because our government is subsidizing homeowners, but if this benefit was taken away, I’d probably waited few more years before buying my house. In SF area, once your income reaches north of six figures, it’s much better financially to buy a home if you plan to stay in the area for a long time. Of course, if your investing prowess is such that you can turn a $100k downpayment savings to $5 million or more in few years, then hold off!

    1. I totally forgot that the mortgage interest is not deductible on your income in Canada. But at least you don’t have to pay any capital gains tax when you sell your primary residence in Canada. The US is almost the same and that 250,000 and 500,000 is tax-free for singles and married couples. Since the median home is worth about 250,000 in United States, the tax-free profits benefit the large majority of the home sellers.

      Related: Don’t Underestimate The Value Of Tax Free Profits In Real Estate

  33. I agree with the article, but recently decided I want my own home. I live in a high COL with rising rents. I think my landlord is preparing to sell ( and a Starbucks is opening up two blocks away), and there are no comparably priced rentals anywhere near me. My costs will go way up soon unless I am able to save enough for a DP on a small condo. I don’t intend to have a family, and don’t need a lot of space. Just somewhere safe and dry that is a reasonable commute to both my full-time job and the business I started two years ago that is finally beginning to thrive. Once I find a place, my investment money will be thrown at index funds to do their magic.

    1. FIRECracker

      Buying less than you can afford is always a wise choice. Whether you buy or rent, if you work out the math, you could win either way.

      1. I can say for sure looking back over the past 10 years that buying less than we could afford did not work out in our favour.

        We live in a HCOL market (Victoria BC) which had 24% appreciation last year and is still going up. There was about 7 years of flat preceding this though, and then a bump up before that too. The last real down market was 35 years ago and buy and hold owners did just fine waiting that out even if they bought just before the drop.

        Over the past 35 years there has been 7% appreciation annually on average, about 4% when you adjust for inflation. On borrowed capital your ROI is very high and add in rental income from a suite and it beats the stock market plus gives you a place to live.

        I agree with diversifying and I agree there are other ways to get ahead, but a primary residence at maximum affordability when you just start out in your career is likely going to pay off if you can hold through a downturn. Especially given that the capital gains are tax exempt in Canada.

  34. For every argument here there’s at least an equal, if not better, counter argument. That’s why I don’t find much value in these posts because they’re biased and aren’t looking at things from an unbiased perspective.

    Owning a home is literally “DIYing” your housing needs. I liken it buying all your food from a grocer rather than eating out every meal. It WILL be cheaper if you own it long enough. I do find that renters overestimate the amount of work that needs to go into fixing a home on a yearly basis. Had they actually had the experience of owning a home, they’d know it’s not that big of a deal unless you’re an extremely irritable person. Most things are easy fixes. And if you don’t want to fix them, guess what? Call someone. Pick up a damn phone. It’s what your landlord does and you’re paying him a premium to do it.

    That said, I appreciate the freedom of location and responsibility that renting affords. For someone that wants to travel and has no interest in ever being an accidental landlord, renting makes a lot of sense. Just don’t kid yourself by thinking that your freedom and lack of worry doesn’t come with a price.

  35. Great article, and it is exactly what my train of thought has been all a long when it comes to owning a home. I stop arguing my points with people long ago because I too come from a background were culturally owning hard assets as real estate is the norm. It worked out for my parents, uncles, aunts and grandparents going this route.

    But it doesn’t suit my life style at all. I have been able amass a bigger net worth by having the ability to move to places in the states and abroad to take advantage of higher salaries. I do not think my net worth would as high as it is, if I didn’t have the ability to pack up a suit case and move on a moments notice. Real estate in general does tie a person down too a general area in most cases, being a land lord is more of a job when you have to take care of multiple properties. It is definitely not for everyone, for some like Sam it is great since he has a passion for it and actually enjoys taking care of his properties.

    1. You make an interesting point… however, if you extend the point over a longer period of time, you may change your mind b/c you may no longer want to work.

      You’ve argued making more due to mobility to work. I’m arguing having such assets so you can generate semi-passive income so you don’t have to work.

      How deep are you in your career? I couldn’t stay motivated after about the 11-12th year.

  36. Graham @ Reverse The Crush

    This is a fantastic read!

    “The purpose of money is to buy…

    That’s exactly what it’s about.

    I couldn’t agree more on the concept of renting vs. buying. And going forward, this will now be the post I refer people to that I get in debates with on the subject.

    I am currently living in Toronto, Canada and renting, but I’ve also never had any interest in home ownership. I was also told to invest in a home by my parents, but if it’s so lucrative then why is the majority of the population broke?

    I’ve always thought very similarly to you on the topic to the point where I feel immature. I feel home ownership adds inconveniences to my life instead of improving it. I don’t want to worry about maintenance and property taxes. I just want to have more time like you.

    I especially appreciated benefit number 1,3,6, and 7. Couldn’t agree more.

    To your questions:

    1. It seems as though the Canadian real estate market should be lower considering your points. Everyone’s heard that there could be a bubble developing. But I think the main reason is because of the low rates available.
    2. Stocks will outperform in the long run if you stay the course.
    3. I think the culture of home ownership could change, especially as more and more people work remotely online. At least in Canadian culture, millennials are having less children, which would lead to needing less space. The trends point to the culture slowly fading because the “American Dream” is changing.
    4. I can’t speak for others, but I’m fine with a smaller place. It’s less cleaning time wasted. I’d rather be flexible.

    Great post!

    1. “I was also told to invest in a home by my parents, but if it’s so lucrative then why is the majority of the population broke?”

      TRUTH! If home ownership is so lucrative, everyone who owns should be rich. So why aren’t they? Because most of their money is tied up in the house or have been eaten up by ownership costs.

  37. I really think the home price explosion in Canada is mostly attributable to their far more lax immigration policy. They’ve allowed virtually anyone into their country as long as they have enough money. Vancouver real estate is all driven by wealthy Chinese millionaires and billionaires looking for a safe place to put their family in the event the party turns against them. There’s also large concentrations of highly educated and wealthy immigrant groups in Toronto. If you drive around the eastern part of Canada w the Newfies, the housing prices are way lower. Tons of people want to own real estate in Canada for reasons beyond just living there.

    1. Yup. Vancouver has become a place for affluent Chinese to cash out stock market and other gains and invest in Canada, which has turned a blind eye to the legal and sometimes illegal foreign cash infusions.

  38. I did both. First I paid off my house before at age of 33 in Vancouver and now I am building up my portfolio. I hope to have $400,000 in my retirement fund by next year.

    I want the best of both worlds :)

    1. That’s impressive to have a paid off Vancouver home by 33! What is the estimated value of the house? All I hear here in SF is that Vancouver prices are out of control.

      I’ve always thought the same way. Why not own a nice home that you can call home base AND have a dividend producing portfolio for passive income? I’ve lived all over and finally realized in 2003 that SF was the place I wanted to be for a very long time.

      1. Around 1 million.

        Vancouver is very similar to SF. In fact the hills in North Vancouver are often portrayed as San Fran in movies!

        I think here in Vancouver we are in a huge bubble and in need of a serious correction. I would like to buy a rental property but the numbers just don’t make sense at this point.

        1. Cool. What are the big industries that are paying income levels to afford such lofty prices in Vancouver?

          I kid you not, but here in SF, college graduates entering all these tech companies are mostly making $80,000 – $120,000 at age 22. Give someone 5 years experience working in tech, finance, internet, and they all have the ability to make $100,000.

          Heck, as a consulting working part-time (25 hours a week) I could bring in over $100,000. It’s part of the reason why I found my ocean view property in SF instead of Hawaii in 2014. If I bought in Honolulu, I’d be more stressed b/c there are so few $100K+ jobs there.

          1. Foreign investment seems to be the culprit. Most working class here can not afford a house. It is a full on crisis in my opinion.

            In Canada we don’t even track foreign money coming in so it is hard to tell what is driving the market. Low interest rates don’t help matters.

            1. But why would the BC government allow such lax foreign investment rules. If you go to many other countries like Thailand, foreigners cannot own the land, and there’s a whole bunch of other rules foreign ownership.

              Do you think the BC government officials are getting bribes and kick backs for turning a blind eye? Why would they want to make property so unaffordable for their citizens when they KNOW their industries can’t support this type of cost. Low interest rates are the same for everywhere, so that is not a unique factor. Did you read this article? Seems nuts!

  39. Interesting post and comments… though I’m saddened by the reaction of Kristy’s parents. My parents are also immigrants. My parent’s aren’t Asian, but from Western Europe. My father was of pre-school age during WWII where he endured daily air-raid sirens and bombings and lost most of his family during those bombings. So, it was the American dream of my parents that all six of their kids graduate from college and become homeowner’s quickly. Check. Check. Kristy, I pray that your parent’s hearts soften over time.

    25 yrs. ago, my husband and I had the same discussion as Kristy and her husband: forgo homeownership to save aggressively, or buy a home sooner? I was in Kristy’s camp, but lost the debate. But unlike Kristy, I wanted to save aggressively to pay cash for a home and have financial freedom.
    There are so many factors in deciding to become a homeowner: your dreams, + goals, finances, home prices in your market, job situation… the list goes on.

    After 25 yrs. of homeownership in different parts of the U.S., we’ve discovered some common “truths” of real estate.

    A. Your primary residence is shelter, not an investment. (with rare exceptions)
    B. Incoming-generating real estate is an investment
    When buying real estate, there are 4 considerations:
    1. Location
    2. Location
    3. Location
    4. All real estate is local (it varies by market, and within a market)

    To illustrate, my childhood home in a small Midwest college town, and my first home in the Chicago burb of St. Charles have had nearly $0 price appreciation in the last 15-20 years, while property taxes have tripled. By contrast, our home in San Clemente, CA appreciated 120% in 4 years from 2001-2005. Since then, prices have remained fairly flat. Now, when our home went up 120% in 4 years it became an “investment.” Why? Because we didn’t plan on living there forever. So, in 2005 we sold. Contrast our decision with our “senior citizen” neighbors who bought their homes in the late ’60 + 70’s for < $50k. Now their homes are worth north of $1.2-$1.4m (as is, vintage 1970!), but they will never move. California is a great place to buy real estate if you are going to live there forever. The same probably holds true for the premier cities Canada as well.

    Financial Freedom is a worthy goal, pick a path and get there as quickly as you can. As long as you live by the Golden Rule, there are no right or wrong answers.

  40. Don’t confuse Canadian real estate with Vancouver and Toronto. These are two unique top tier cities and completely distinct from the rest of Canada. Toronto is the “London” of the country, for want of a better description. It has a fully integrated economy at the hub of a surrounding population about 7mm. It has the most company headquarters, the largest public sector, media and entrepreneurial activity by far in the country. It is in the centre of the country and is the hub for goods, transit, money and opinions as they flow to and from the US market. There is only one “Toronto” in Canada. Love it or hate it, take it or leave it. It deserves its world ranking. Vancouver is a different story. Stunning city and fantastic place to live if you are strongly middle class or above. Virtually no sustained capacity for industry, public sector or entreprenurial activity to support current RE prices which are disconnected from capacity to buy and the rental market. Foreign buyer support for RE is a very real factor there. It is present in
    Toronto too, but the same way it is present in London, NY and Hong Kong.

    1. Toronto and Vancouver are not world class. TO Is NOT New York and Van is not Paris. NOT even close!

      Are you a realtor ?

      1. Greg, give your head a shake. No where does this commentor compare Toronto with New York and Vancouver with Paris. But make no mistake, these two Canadian cities ARE world class and countless studies and world rankings put them on par. He is spot on with his comments about the economic diversity in Toronto and the importance it plays in the larger Canadian story.

          1. What an odd question? You think only realtors think Toronto is world class. Give your head a shake and take it out of the sand.

            Oh, and for the record, I’m not a realtor. Just someone who has done a tonne of traveling, and after having been to 6 continents and almost 76 countries, I can assure you, Toronto and Vancouver are world class cities.

            1. Matty boy. I live in Vancouver and have been to most major cities in the world. Los Angeles, San Fran, New York, Washington DC, London, Paris, Rome, Barcelona, Monte Carlo, Moscow, Zurich, Hong Kong, Seoul, Shanghai, Bangkok…..

              Vanc is nice to live in but certainly not a world class city on the scale of those. Food wise we are up there, but not in terms of culture, finance, arts.

    2. Foreign buyers are ubiquitous in every major city in North America. So why is it that Vancouver prices, with “no sustained capacity for industry, public sector or entrepreneurial activity” has am median home price of $1.4M and is more unaffordable than London, NY, and definitely SF?

      I don’t believe the British Columbia government would be so money hungry or cruel to its citizens to allow foreigners to have a carte blanche all-you-can eat policy to buy everything in site. Could the BC gov’t be this clueless? Is immigration policy that much easier in Canada than it is in the US? hmmm.

      1. To Greg, no I’m of course not a realtor. I’m a high net worth business owner with a widely diversified portfolio of stocks, fixed income and real estate investments who enjoys this blog very much. You’d do well to listen to a diversity of opinions.

        To Sam, the BC situation is a true disconnect. It’s graphic and quite disturbing. It will likely end badly. The government hasn’t controlled it and the new laws will hurt as many people as they may help. There is absolutely no native economic activity to support those prices and none in waiting. It is a case of a great city pumped beyond any reasonable capacity for normal citizens to afford to live there, assuming living there means also owning a home. That is the reality for now. Things may very well change but Vancouver has been running hot for a very long time.

  41. This guest article makes no sense. Real estate (or at minimum hard assets of some kind) should be part of every portfolio.

    Don’t like Toronto prices? Buy in another smaller Canadian market, or in the USA for that matter…

    Want to move? Move… and rent out your place. Or just hold it…

    With a million bucks they could mortgage a very nice home in Chicago, Detroit, Cleveland, Columbus, Indianapolis, etc… for $300-$500k and still have money left over to travel EVEN if you don’t rent it out.

    Writers: you’re looking at this the wrong way…

    1. Amen. This is the most ridiculous thing I’ve read relating to investments. Their tiny $1M will run out long before they’re old, and then what? As someone younger than they are living In Toronto, who has built up a net worth far in excess of theirs, 70% of it through real estate, I just shake my head at their naïveté.

      1. I call BS on this… a guy under 30 who’s built a NW far greater? Give me solid numbers on your income, how you secured mortgages, what you do for a living.
        otherwise pure BS. Prices in real estate have gone up but even over 10 years you wouldn’t have made a million on a house.

        1. Jealously is a funny thing. It’s not BS, and while it’s certainly none of your business how much money I earn, I will tell you that it’s not on one house – I never claimed it was – because you’re right, in 10 years it wouldn’t have gone up that much. I own 17 small income properties, none valued more than $200K, with 12 of them owned outwright at this point. I am 30 yrs old and bought my first one 9 years ago.

    2. FIRECracker

      Me: “I made $1M by avoiding real estate!”

      You: “You should use some of that money to pick up some real estate!”

      Not sure you’re picking up the point there lil buddy…

  42. Great to hear from the other side of the grass is green!
    Especially like: “Time is our most precious resource. We can always make more money, but we can’t make more time.” This hits home for me.
    Also good to see so many comments expressing personal opinions in a respectful manner.
    Now, if only political opinions could be put forward so respectfully.
    Thank you FS for sharing such a great article.

  43. quantakiran

    This is a really inspiring post. Congratulations on achieving FIRE! And don’t worry, Asian mothers disown you but they generally give in over time or for the sake of grandkids. She’ll let you know when she’s ready.

    I seriously considered buying property for renting out but the local law states that in order to evict a tenant, the landlord must find accommodation the tenant deems satisfactory and affordable. Way too much of a hassle to get freeloaders off your property.

    I don’t think that the culture of home ownership will fade. I think it’s in a lot of us (including me) to settle down and that desire only increases with age. I think I’m young enough to still be seduced by thoughts of being footloose and fancy free though I need to achieve FIRE first. I know that home ownership ties you down much more than renting. Speaking from experience, once the building of the house is done, the never ending maintenance kicks in whereas tenants just call the landlord.

    The older I grow older, the more I value my time. Having liquid assets is extremely attractive when all you want to do is enjoy your time and not have to put up with mundane annoyances like cleaning out the gutter. So investing is where I try to be.

  44. Wow I had no idea Canadian real estate is so expensive. I wouldn’t want to buy there either. Glad to hear you’re following your own gut instincts and doing what is best for yourself. Everyone’s different and there’s nothing wrong with not buying a property if you don’t want to.

  45. This couple are doing what’s best for their situation. So many naysayers must find it hard not to feel slightly envious that for someone so young, they already figured it out. I’d rather learn from those who made it than by learning it the hard way or worse, learning from the broke Joneses next door. There are benefits to both. I prefer to own a home because of stability for my family. Being Asian, maybe a house is a symbol of one’s stability to be bequeathed to future generations. My mother was different. She was more upset that I moved out to live in my own house. When she became a grandma, I was brought back to her good graces :) (hint, hint!)

  46. Middle Class Millionaire

    Great post, it was a very enjoyable read. Although I do not 100% agree with some of the points, it is good to get other perspectives.

    I have a few responses for some of the points however:

    “Benefit #1: You are NOBODY’s bitch

    When you own a property, all your money is stuck in the house and because you can’t sell a brick or window to pay off your house, you have to continue being a bitch to your boss in order to pay the mortgage, insurance, and property taxes.”

    Response: As a renter, you still are somebody’s bitch; your landlord’s. If he/she raises the rent, you pay it or you leave. As a renter, you are paying your landlord’s mortgage, insurance and taxes for him/her… and most likely putting a little extra into his pocket too. If the landlord is the bitch, then what does that make the tenant? As a landlord, I don’t feel like I am my tenants’ bitch. But then again, I am smart enough not to buy rental properties in pro-tenant/anti-landlord locations like San Francisco or Toronto.

    If you are a homeowner and get a job out of town somewhere, you can leave just as easily as a tenant could. I did this myself… I bought another house in the new city, kept my old house and rented it out. No problem with this what so ever. All that happened was that I added 1 more rental property to my portfolio and I have 1 more tenant building equity by paying down my mortgage for me and putting some more passive income into my bank account each month.

    I can honestly say… I have NEVER begged a tenant to stay. I have had good tenants move out before, usually because they were ready to buy their own home. I would thank them for being good tenants and for our good relationship, but I 100% support them in their dreams of homeownership. Once they moved out, I raised the rent and then filled the vacancy with a new tenant that is now paying more than what the old tenant was paying. Win-win!

    “Benefit #6: You have no maintenance costs

    It costs next to nothing to own and maintain a portfolio of low-cost Index ETFs. Maybe a $5 transaction fee here and there, and a rock-bottom 0.1% MER. But for a house the costs just never end: property taxes, insurances, maintenance, lawyer fees, and closing costs when you sell.

    On the contrary, a portfolio pays YOU, not the other way around.”

    Response: If you buy a property right, your maintenance costs are more than covered by the rental income that comes in. If you buy a property for your personal residence, buy a newer construction house. My home was built in 2001. I have lived in it for almost 5 years now… I don’t think I have had to pay to replace anything at all up to this point… Maintenance cost = $0 so far. Eventually I will probably rent this house out if I ever move (because I never sell), and my rental income will more than cover any needed maintenance costs.

    Final Note: Now, I do not believe that homeownership is for everyone, and you have done a good job creating wealth without real estate! Great post overall :)

  47. Incredible! We get one life and you are dominating yours. I commend the approach and enjoy your writing style. Incredibly powerful to do things your way and not be tied down by a job or house. Great article.

  48. I think a lot of home owners like to buy at their means or even over. The key is to buy below your means and keep buying more properties below your means and rent them out for passive income. Of course not all homes are viable but you must do your research like FS does. Most people are stuck in the rat race due to being stuck in homes they can barely afford or can’t really afford. Buy a $250k home instead of a $500k home and you can still have the flexibility to travel, pay for lawn maintenance, and upgrade the home as you live there (and hopefully sell for more, or rent for more down the line). People seem to be in competition with their friends, co-workers, or neighbors to have the best and possibly most expensive home.

  49. I have no interest in buying a home in the near future. I like stacking my paper assets instead. I like the flexibility leasing offers and I have zero interest in becoming a landlord. It boggles my mind that people put their financial lives in the pits just to say they are home owners. Great job not giving in to the “conventional” wisdom!

  50. I think the ideal situation is owning real estate and living passively off other investments, like Financial Samurai.

  51. “The purpose of money is to buy…


    Boom! Once you realize this, it all comes into focus.

  52. I completely agree with you Kristy. Having so much money tied down and not earning anything is a huge disadvantage. I think we may end up buying somewhere but it will take a long time for us to do that.

    It gives you much more freedom, and that’s a lot of what FI is about.


  53. This is a great article. I don’t think it entirely contradicts Sam though. He is very pro real estate, but I don’t think he suggests putting all your wealth and then some (via leveraging your net worth multiple times over like most do) into your house (‘investment’), and I think he values quality time a lot (he travels all over the world, plays tennis, hangs out with his parents in dreamy Hawaii, enjoys time in his house overlooking the ocean). Since he doesn’t work full time, and actually enjoys aspects of real estate and renovation, his time spent on real estate is not entirely wasted.

    There is however a lot of hubris, arrogance and overconfidence attached to home buying in the US and Canada. Many people have timed the housing market well, and it has worked wonders for their net worth with leverage and appreciation, but it is entirely false for them to advise others that the ‘market always goes up’ and they are ‘throwing away money on rent’ – these are people who do not understand basic economics, finance and markets – particularly the issues of inflation, liquidity, interest rates, and the returns/risk of alternative investments like stocks, bonds, hedge funds, private equity, foreign exchange, commodities, owning a small businesses.

    I am in a similar position as Kristy, I’ve managed to enrich myself quite well over the past decade, but I have only ever rented and don’t regret it. I value the low headache factor, flexibility and optionality.

    Contrary to what Sam says about homeowners being price setters and renters being price takers, I’ve experienced the opposite. I have negotiated my rent down massively several times (during crises) and otherwise kept my increases flat to moderate (below inflation – which Sam has pointed out is too low anyway according to government figures) by being a good tenant, while growing my income and investments massively. I have also moved in years I felt like I wanted to, and also moved to upcoming neighborhoods where renters are price setters. As pointed out above, you can be a price taker when owning as well, particularly if you have to take the price the market gives you when you are forced to sell due to personal circumstances like a job, addition to family, divorce or just the simple fact that you bought too much house relative to your income and can no longer afford it or want to.

    As a homeowner you are also a price taker when your RE taxes go up with inflation (or perhaps more) or when you are forced to ‘take’ the lovely commission your real estate broker charges you (6%!!) for the convenience of simply listing your house and showing the next buyer where the keyhole is in the door. You are a price taker when it costs too much to maintain or fix your house, because contractor rates and labor has gone up (with inflation or more!) or the cost of materials has gone up (with you guessed it – inflation!). So yes, my point is that owning vs renting is a very complex question and should never be simply distilled to a simple one size fits all answer for all. It is unfortunate that us ‘renters’ are disowned by the rest of our family and friends, even if your net worth is several X times theirs! But of course we don’t really care!

  54. Love the attitude and love seeing people travel the world freely due to successful investing.

    Personally I’d much rather be living Sam’s life (and I’m actively pursuing copying the best parts!). I love investing in rentals and analyzing all the moving parts as much as investing in stocks/bonds/REITs. I love living in California so I’m fine being tied down here (still love traveling internationally as much as possible). I’ve never been to another place where you can drive in any direction for 1.5 hours and arrive at a beach, the snow and mountains, one of the greatest international cities (San Fran), and so much food, culture, and random fun activities.

  55. Taylor Lee @ Yuppie Millennial

    Real estate prices in Vancouver are ridiculously overvalued and not at all commensurate with demand (just look at what rentals are going for). Not really sure what is fueling the speculation up there (foreign buyers? just haven’t had their own crash yet?) but it’ll be interesting to see if there is a fallout a few years down the line, assuming interest rates ever go up again.

    1. I don’t get why Vancouver is so expensive. Can you help me explain? What are the big industries and companies providing the job growth and incomes to sustain $1.3M+ median home prices there?

      It can’t just be foreign buyers.

      1. vancouverite

        low interest rates. boomers selling their house giving money to their kids to get into a pricier neighborhood n the bidding bubbles. you’re right. there r not a lot of jobs here. boomers in corporate jobs are deferring retirement. millenials make anywhere from 30k to 90k which would be poverty in Bay area

            1. vancouverite

              you’ll notice in the article’s comments people continue yammering on about hot foreign asian money. Those probably don’t have parents giving them huge sums and could hardly imagine what that would be like. In Asian cultures, it’s quite common (e.g. leaving the primary dwelling/disposing dwelling leaving all the $$$ to the one eldest son bearing the lineage). So if commenters are gonna be racist about foreign Chinese people pumping and dumping, then there are lots of Asian Canadians, and any other Canadian mom/dads, who are helping their kids out (sometimes in all cash – financing isn’t even an issue anymore). Perhaps such action is unfathomable for the withouts, (unfair, yes), makes no financial sense, and lacks diversifcation. But if you are about to be a father yourself soon, then you will understand – it doesn’t have to make any quantitative sense. It’s cultural. You want to ensure your closest bloodline will always have the best shelter you can afford before you die.

      2. It’s crazy leverage. As a resident of Vancouver, I have to say, people here are truly nuts about real estate. We just spent some time finding a new place to live, and we saw some exciting things. Some examples of crazy:

        – we pay $3800(!!) in rent for a property that would probably have monthly running costs in the realm of $8000-10000, particularly when you account for the cost of capital tied up in it. (1500sqft duplex in a prime area on the west side of the city which would sell for ~$1.5M)

        – one similarly priced rental that we looked at appeared to be owned by a woman ~30 years old which she had recently purchased for ~$2.5M. All units in the building might bring in $8000/month in rent. Minimum down would be $500K and at 2% the mortgage would be ~$8500/month. Helicopter parents driving the show probably used a HELOC on their own property to pony up the down payment and appeared to be mostly concerned about bank financing of the whole deal. (this is what they told us)

        – one property manager we talked to out and out told us that they wanted to structure the lease to kick us out when they flip the property in 1-2 yeas

        – one landlord we talked to planned to live in the basement for 10+ years with his fiancee/wife because they expected their cashflow to be negative if they weren’t renting out the main part of the house

        1. Interesting datapoints!

          I like the one about the 30 year old woman buying the $2.5M place. Did you ask her what she did for a living?

          My neighbors a block away is a 22 year old art student. She bought the place 100% cash for $2.25M. Not bad being an art student! See more here.

          So as a renter who pays $3,800 a month, do you feel like you are getting a bargain? Or are you frustrated about not being able to buy?

          I had a limit of $2,000 for renting, but that was back in 2002. I said if I have to pay more than $2,000 to rent, I’m buying. So I did in 2003.

          1. We chatted them up for a while to get an idea of what the deal was, because it seemed a bit odd, but never got to that part. Also, they’re white, so it’s not ‘Chinese money’ ;). We took a pass because they wanted us to accept disadvantageous lease terms (ie: many landlords here are trying to get any tenants to sign fixed term leases that allow them to turf you at the end of a year as it’s easier to flip untenanted dwellings. This is sort of unacceptable when you have kids). The stated reason for wanting us to take their bad terms was because it makes financing easier for them, which in conjunction with the bad terms made them smell like terrible landlords.

            Frustrated isn’t how I’d describe things exactly – we view housing as a cost, rent or own, so it’s really just a question of overall cashflow and impacts on savings. BC has rent control, so it’s unlikely that our rent will appreciate at more than 4%/year. Plus, evicting good tenants is very difficult here – the only options are owner occupancy or significant renovation / redevelopment.

            Even at this price, renting is < 20% of our gross income, whereas to own we'd either have to accept living in a much worse area (less convenient for work, schools, groceries, etc) which would require more driving or housing would potentially cost close to 50% of our gross income, or we'd be in pretty tight quarters, which is tough with a small kid around. There's moderate odds that we'll want a different space in 3-5 years as we have another kid on the way, so owning would be inconvenient or would require us to have more space than we need right now.

            1. Interesting info. In SF/the US, you have the right to evict the tenant if you are selling the house or moving back in. But, there’s obviously a nice way to do things (ample heads up, etc).

              That is good you haven’t “fall for” housing yet. I fell HARD for property when I was growing up in middle school in Kuala Lumpur, Malaysia. I would visit these beautiful homes on the hills with swimming pools and views for my parent’s friend’s parties and told myself maybe one day!

              The dotcom bust in 2000 reminded me as a 23 yo the importance of converting funny money into real assets. I remember being sick of living so sparsely in a studio, then one bedroom. What was the point of working and saving so much, I asked myself.

              With potentially another kid on the way, is there no desire to lock down a place? Most people I know would be super anxious to lock a single family home down. How are you investing your money currently?

            2. In BC you can remove the tenant at time of sale if it’s a subject of the sale and the new owner intends to occupy, but it still requires 2 months notice and paying one month rent.

              I grew up in a house we owned – cash flow issues and poor quality of our living space contributed significantly to family problems. Put a different way, is a family unit with predictable cash flow well in excess of needs more or less likely to be in an unstable situation than one that spends 50% of gross income on housing? Having a predictable living situation is more important and has thus far been achieved through interviewing landlords and aiming to do business with actual business people, not folks backed into land lording through desperation or property speculators.

              Our investable assets are in a combination of legacy mutual funds and a diversified equity portfolio with a small amount of cash and lots of cheap revolving credit for emergencies.

      3. I think part of Vancouver’s problem, like San Francisco’s, is a a failure of rezoning/adding density at an adequate pace. It’s amazing how many low-rise buildings there are in downtown Vancouver – even right in the centre, on the busiest streets, there are blocks where all the buildings are only about 2-3 stories tall. Buying a small apartment building in Vancouver is really expensive when you consider the cap rate- but it’s because a lot of the buyers are waiting for the city to rezone, so they’ll redevelop the property and add 3-6 more stories to it. Such a risky move!

        This isn’t to say that the other issues mentioned aren’t factors – I think they definitely are. Because prices have risen so steadily, and so quickly, there’s a lot of shady stuff going on – speculators, tax evasion, etc. Also – there’s a real range of rental rates. I wonder if BikeMike’s landlords have owned that duplex for a while – if they’ve owned it for 15 years or something, their monthly running costs are probably way lower, and they might not even believe that the capital they have tied up in the property is real. (Think: “This market is so crazy, we’re going to lose that capital in a few years anyway. We’re paying our bills, we have a nice life. Let’s not rock the boat – let’s be nice to the tenant.”)

        The foreign buyer factor is probably one too – and the ideas Kristy mentions, about home ownership being a cultural goal – might even contribute to that, particularly as there are so many rules in China about what/where you can own property (or so I’ve heard), whereas Canada is relatively unregulated. I also agree with BikeMike – crazy leverage plays a part too. That, and of course the intergenerational wealth transfer.

        I’ve spent so much time trying to make sense of it. Like you, Sam, I was like: “I don’t get it. What are the big industries and job growth? Where are the incomes?” The film business is so hit-and-miss, the mining industry is down. When people said: “well, the prices have decoupled from incomes”, I thought: “How is that even possible?!”

        Now, I think it’s a perfect storm in Vancouver – there are enough high-paying jobs to make it urban and offer some real amenities. Canada is seen as “safer” than the States – the political rhetoric is softer, the health care is kinder, there are fewer guns, it seems like there are fewer cowboys in financial regulation here, because all the ones with big egos move to the States anyway – and Canada didn’t tighten visa rules after 9-11, either. Vancouver, small as it is, is stunningly beautiful and has mild weather, so lots Canadians move here or want to retire here, or others make enough money elsewhere that they can afford to move their families here and raise there children somewhere “safe”. With these fundamentals, the prices started rising… and they haven’t seemed to stop yet. Part failure to plan by governments, part greed, part denial, and maybe even some bubble…

        My husband and I have bought a house. We bought when I was convinced there was going to be a correction; I’m still convinced – I’ve spent hours stress-testing our net worth models – but I’m not as worried about it as I was when we first handed over the bank draft. Mostly now, I just think about our cash flow and keep my head down. We’re in it for the long haul.

        I read Millennial Revolution, and I see Kristy’s points – I was never that convinced that being a homeowner was the best path to wealth or whatever. Sometimes I think about selling, too, and cashing out. But for us, at this point, we’re not travellers – we wanted to put down roots in a place and to be part of the community. So here we are, right in the mud!

  56. Jack Catchem

    “Because of rental laws that somehow heavily favor deadbeat tenants who refuse to pay their rent over the property’s rightful owners, you somehow live in fear of them! After all they could take a claw hammer and destroy your life savings in an instant.” – As law enforcement this really resonated with me. I hate telling landlords the horrible news that they can’t change the locks on their tenants and have to complete a formal eviction process. Having to do this several times a month really puts me off wanting to own rental properties!

    As for home ownership, it’s a strategy. Going to be in the same place for a while? Have a stable job, family, and a good school system? It makes sense to tie yourself to the system with a mortgage.

    Congrats to the author for bucking tradition and realizing her goals were different what tactics are available for her and maximizing that!

    When I was single and a Marine, I had the flexibility and did not need the logistical burden of property. Now in Law Enforcement with a family having a stable base of operations around which to center my logistics (aka “home”) is absolutely worth it.

    Having a wealth strategy and capitalizing through tactics it for the win! Shame on people for hating the author’s tactic without appreciating the strategy. It’s not the life for me, yet, but why throw shade?

    1. Same reason I stay away from getting into a rental property. I don’t want to worry about renters and maintenance. If I were a builder, maybe i’d have another point of view. Being in IT, i’d rather have my assets more liquid…

      1. Jack Catchem

        Hah! That’s what I’m saying! Play to your strengths. My job has me stuck in a 1950s paradigm, which isn’t bad as long as I get what I’m paying for. My inflexibility can be just as much as an asset to me as your IT flexibility is for you.

    2. Stubborn Old Guy

      I think if my tenants wouldn’t leave there might be a couple rats or snakes that would find their way into to apartment.

  57. Maxoffshore

    Interesting read. I am also all in for renting for many reasons. Traveling the world on passive income vs. owning a property seems like a good idea.

    Congrats on you being a millionaire that young.

  58. The cost factor is a huge one.

    In some markets you could spend $600k for an “average” house.

    In other markets you could buy 14 rentals units for $600k, make $60k per year off them, and retire early (which is what I did).

    One HUGE factor here is the cost of real estate in Canada. It turns the entire equation around versus a lower cost market.

    That said, rest assured that there are people making a killing in real estate in Canada.

  59. Owning a house that you live in is not an investment, it’s a comparable to renting while you build some equity through principal payments. Appreciation is an added bonus but not something to be relied on except for long term investing. If you can own your home and pay principal, interest, taxes, insurance, and upkeep for less than you would rent for it makes sense to buy a house as is the case for me. Beyond that it becomes a discussion about do you think principle and appreciation is worth it (growth potential of the area) and do you value other things that come with a house.

    Housing allows you to use leverage and hedges inflation. Truthfully, I think there is a balance between building passive income through physical passive income assets and investment market assets. I can retire by 42 with my investment assets as I invest today and as I model investing more money the rate of decrease in age of retirement continues to decrease because of investing time horizons. With rental properties on the other hand I can easily see pushing my retirement age farther down into my 30s. This is because of leverage and the extra work involved in getting good cash flow properties (in my mind, cash flow of rental property is the only short to mid-term investment through houses). 42 is a safety net with standard investments. In the 30s is a calculated risk on rental properties.

    I can understand why you would want to rent versus own a house. It is easier and I said the same thing the first couple years out of college. I do find it interesting though that so many millennials (of which I am one myself) all want to rent. That tells me to buy houses to rent because as more people rent, rental rates will increase and housing costs will decrease. This is especially true in an area like where I live now where the rent is high compared to the cost to buy a house.

    1. I’ve thought the same way. If the trend to rent is a generational movement, I want to be buying as many rental properties I can comfortably afford w/out being annoyed. One way is through REITs and real estate crowdsourcing companies.

      But I’m still trying to figure out whether it is the DESIRE to rent or the INABILITY to buy that is driving this anti-homeownership movement. It is much harder to qualify for a mortgage nowadays versus pre-crisis, for example. Median income levels have also declined.

      Kristy and her husband also wanted to buy, but didn’t like what they could afford in 2012. Maybe they will change their minds in the future, who knows.

      What I do know is that massive institutions had been buying rental properties aggressively since the crisis. REITs have grown bigger and now there is crowdsourcing money to inject more liquidity into the market.

      What do you think? Desire or inability?

      1. vancouverite

        inability to get in desired home with given budget leading to then changing goal leads to greater happiness. otherwise wouldn’t it be perpetually frustrating to continuously strive for an unattainable?

        1. It would be. And it is logical if one cannot afford to justify the reasons why. There also must be a lot of angst where some people are thinking “What the hell? I have a $1M portfolio and I can’t even buy a sweet home? Rage!”

          But if you have a $1M portfolio in your early 30s, you’re pretty set. You can take $200,000 of it and buy a $1M place if you want. I’m assuming $1M buys an OK place in Toronto. But, I guess if you have no income beyond the $30,000 a year in dividends, that will be a problem. Hmmm.

      2. I’m not OP, but I think it’s inability to buy which has created this generational zeitgeist. Oh, you mean I can’t buy a house, pay my massive student loans, own a car, take a vacation or two, afford kids? Then I’ll rent and drag out my 20’s into my 30’s, 40’s… I don’t think this will last forever.

        1. Hmmm, perhaps 30s is the new 20s? And given the median age of homeownership is in the early 30s, it might simply shift until late 30s or early 40s? Could be.

          Education in Canada is a fraction of what it is in the US and there’s extremely affordable healthcare. These two things should help Canadian citizens increase their wealth faster than American citizens. Or maybe not. I’d love more perspective here.

      3. I think the answer is both but dependent on the socioeconomic status of the group that the person is in.

        The larger group is inability because of hand the decline of strong middle income jobs due to business automation and high levels of debt/student debt. As a percentage this group is larger than it has been in previous generations. Some of this group are likely interested in owning a home and will likely do so someday as they get older but others in this group will instead fall into the second group as they age.

        The second smaller group is desire. These folks have higher paying jobs because they are either working in something that is not being automated or are the ones automating other jobs (or are entrepreneurs, business owners, etc.) and have managed to pay off their debt and student loans (or avoid them all together). Because of their dedication to their professional life they don’t want to own a house because they don’t want to spend time on yet another thing when they already have to dedicate so much to earning a truly good income. They may also want flexibility so they can travel for job opportunities sine so few employees can expect to stay with an employer long term today or maybe they want to travel before they settle down because they can’t imagine having enough time for to do what they truly want to do after having a family/kids.

        I think regardless of which group millennials are a part of however there will still be a significantly increased demand for rental properties. The income gap will continue to widen with more and more people in the inability group for a longer time further driving up demand and prices for rentals. Those still in the desire camp will continue to face more and more life pressures as our world moves faster due to technology. They will still want rentals more than those before them because they simply don’t have time to take care of a house. These trends will likely to continue to accelerate beyond the millennial generation. By acquiring your own rental properties you get in front of these trends and have them help to push you towards more passive income (or semi-passive depending on your outlook) that gives you time and freedom to get out of the cycle these two groups face.

  60. Haven’t thought about buying property until I moved to the bay area (was pretty set against it, until I had to deal with ever increasing rent and property prices the past few years). Rent vs. Buy calculators aren’t rational in the bay area. Most places my break even point would be 5-10 years if I bought vs. rented with 20% down. In the bay area with ~15% increase in property year over year, calculators states break even point would be 1-2 years. While that makes more sense for me (I move about once every 2-3 years), the payments are insane. 20% down would be 200k-400k with 5k-10k monthly mortgage. To top it off, the houses aren’t even nice or new.

    So the fomo sets in, look into property in Seattle or Austin, maybe even San Diego. Numbers starts to make sense and I’m more optimist on the upside of their markets vs bay area. But all this locks me in. Poster made a great point that this would be a concentration in investment too, one that isn’t as liquid. I hate dealing with tenants too. Lived through my parents having squatters. OMG, even with several years of things going well, that one year was so stressful. The amount of travel and court delays. They ended up wrecking the place too.

    I’m looking into REIT and that real estate crowd funding site Sam posted before. This is a great post. Good to have another perspective since Sam’s post are so positive towards ownership.

    1. That’s interesting that you were anti-real estate until you moved to the Bay Area where prices are more expensive than most in the country. The good news is that rents have peaked and have started to decline. Everything will continue to decline until we experience some big IPOs from Uber and Airbnb most notably. Then I think we recover again.

      Worth reading this post again:

      1. Being anti-real estate was easier where I lived before (smaller cities in northeast) where housing prices increased 5-8% YOY instead of 15% in bay area. Major factor was that I knew I didn’t want to stay on the east coast, so chances of me staying at a place for 5+ years was small. Moving to the bay area 3 years ago felt like coming to a place where I belonged. Great weather (no more digging car out of the snow!!), tech focused, and people seemed more logical/experimental.

        Remembered that post on buying real estate early. Scared the crap out of me. Taking out 1mil+ loan. You have way more optimism than I do. I’m making decent money now, but taking a 22% hit on something I don’t even full out own, monthly payments that I would know I’m overpaying. The last part would drive me crazy with me looking for best value all the time.

        Uber… I wonder if one company can cause a chain reaction for the bubble bursting. I’m haven’t researched all the accounting/earning terms (shame on me!). Did you read this report on leaked financials?

        First half of 2015 with GAAP loss ~$1B. Recently sold China division to Didi this year. Ongoing lawsuit for employee vs. contractor. I can see them becoming successful with things like self driving cars / other logistic solutions. It’s a bet on if they can make a break through in this tech. They’re doing the self driving car tests in Pittsburg with customers. It’ll be a big indicator to me if they’ll make the breakthrough before running out of money.

        1. The amazing thing about Uber and Airbnb is that profits don’t matter right now b/c there is so much liquidity chasing these biggest deals. With Uber’s China business sold, they will lose less money.

          I fear and feel bad for those who are looking to buy after Uber and Airbnb go public 6 months after their lockup period. I’m pretty certain after a ~10% fade in the property market here until 2018, the extra 10,000 people who are liquid, many of whom will look for property will reignite the market again.

          It was very clear when Google and FB went public.

          5-8% YoY price increases w/ 20% down is 25% – 40% cash on cash YoY. That’s pretty good to me.

          Living For Free In Your House Through Cash Flow Or Principal Apprecation

  61. Fiscally Free

    Most of the benefits listed are valid. I’m definitely tired of mowing my lawn (and I’m too cheap/stubborn to hire a gardener), but I think the author should also list some of the disadvantages of renting/not owning a home, like having to pay rent.
    Not paying taxes and maintenance were listed as benefits, but to me it’s obvious the rent you are paying must be covering these expenses, in addition to profit for the property owner.

    1. FIRECracker

      Yes, your point is valid. Some landlords add the costs of home ownership into the rent. However, as a renter, you have options to rent somewhere else instead. Somewhere less expensive, where utilities are included.

      In my case, I was able to find rent low enough to included all utilities and cable. In that situation, the rent is much lower than the cost of home ownership. And now, since I’m financially independent and no longer tied to an expensive city like Toronto for work, I can move to another city. And the passive income from my portfolio covers the rent, which unlike ownership expenses, are fixed and predictable.

  62. Housing is not for everybody. And after being a homeowner for 4 years, I’m thinking it may not be for me! People think rent increases (which it does) and mortgage payments stay the same. My mortgage payment is several hundred dollars more from when I bought my house because of my property taxes increasing. The higher your home goes in value, the higher taxes will be. I don’t mind fixing things once in a while. Makes me feel like manly. But I would much rather read a good book or play with my son.

    And that picture looks like it’s from National Harbor in Maryland. Correct me if I’m wrong. We love that place my son climbed on that statue’s face numerous times :-)

  63. I think one of the key advantages in real estate investing is the use of leverage. You can buy a house for 20% down. If the value of the house goes up by 20% you’ve doubled your money.

    Yes, you can purchase stocks with leverage, but those loans are callable. If the value of your stock investments drop you can be hit with a margin call. There’s no equivalent in the real estate market. Otherwise, the main advantage of real estate is that it’s an awesome inflation hedge (something FS has written about many times).

    One question I’m very interested in – why is that Asian cultures put so much more value in tangible property? I know that in English and American cultures land was valued because you couldn’t vote if you weren’t a land owner. Land ownership represented being part of the aristocracy. Was there something similar in Asian cultures? Did businesses get taxed more than land? Or were businesses more likely to fail? Or maybe there’s just less “rule of law”, meaning that companies could easily be put out of business?

    1. “You can buy a house for 20% down. If the value of the house goes up by 20% you’ve doubled your money.”
      – Not true. Most of your gains will be eaten up by real-estate agent fees, interest to the banks, and taxes to the government. Even if you use leverage, the cost of home ownership is the same. So a lot of your money (that you could’ve invested) is going towards costs of maintaining the property, taxes, etc.

      When it comes to leverage, the party who benefits the most is the bank. If the house appreciates, they take a huge cut of your gains. If it depreciates, you could be underwater, but the bank makes money either way. It’s a situation that lets the rich get richer no matter which way the market swings.

      We broke down the return from leverage here:

      “Why is that Asian cultures put so much more value in tangible property?”
      – I think this is due to distrust of the government. If you’ve been through war, famine, etc, and the totalitarian government can take away your wealth at any second, you’d rather be putting it into tangible things they can’t get their hands on (like jewelry, houses, gold, etc).

      1. Thank you for the post, always good to get a different point of view.

        I read your blog post that you referred to and I assume this refers only to the rent vs own discussion? Not buying real estate as rentals? In my point of view home ownership should not be viewed as an investement so I think its unfair to compare home ownership with the stock market.

        You also left out buying furniture for your rental apartment in your stock market calculations so that should be added to make things more comparable.

        Is there really 5% sales fee in Canada? That is crazy. I live in northern part of Europe and I am selling one of my rentals now for 1,4% fee + tax.

      2. I’ve read also that the reason you find so many Jews in the precious jewel area of employment is that they have been chased out of so many countries, they learned early on they could hide the jewels easily so when they fled, they didn’t lose all their wealth. Not trying to stereotype but it makes sense.

  64. The Green Swan

    Great read! I think there are so many factors in someone’s life to determine whether buying a house is right or not. For me raising a family and having our own space was important. Can’t say it will be like this forever, but for the stage we’re in we prefer owning.

    1. Same here. Life is different when you have kids. When you were born and raised in crawled concrete jungles in Asia, you really appreciate the amount of living space you get here in North American homes.

      1. Crazy how much bigger homes are in North America than in Asia right? We seriously live in luxury comparatively, while prices here versus HK, Singapore are so much cheaper.

        1. Interesting! I actually have the opposite opinion. Growing up in Asia actually gave me the perspective that we need very little to be happy. The lack of space never bothered me. As long as I had food, a roof over my head, and friends to play with that was all I needed.

          Having more things and space is fine…but having to stress out and work long hours to pay for it is not. I’d rather use the money to buy my time back. Experiences and spending more time with family always beats things in my book.

  65. 1. For people that learn and invest systematically, it really doesn’t matter what kind of investment you end up choosing. For people who don’t, well it really doesn’t matter either. lol.
    2. The author was talking under the assumption that vast majority of people own where they live and that’s it. Owning where you live is NOT an investment — as long as you do not sell, you are effectively transferring the rent money to mortgage payment — you do not own it in the real sense until it is free and clear.
    3. Investment has to have return of investment, hence you’d have to talk about owning at least 2 properties to begin with — at least one property that you will see some kind of ROI periodically.

    1. I agree w/ you. Renting = shorting the real estate market. Owning and living in your primary residence = neutral the RE market. Owning 2 or more properties = long the RE market.

  66. The graph of home prices doesn’t account for the relative values of the two currencies. Canadian has become much weaker than US. They’re a lot closer when you normalize for that. Also the bulk of the housing stock in Canada is in world class, cosmopolitan cities which skews the average. Graphs of Toronto/Vancuver would look similar to NY/SF/LA. Would be interested to see median comparisons.
    Also, if you’re 30ish, you’ve really only seen stocks/bonds go up since graduating in 2008/09ish. From late 2007 to today, SandP500 is up only about 40%. From bottom in March 2009 to today it’s up over 200%. Careful to confuse fortunate market timing to having it ‘figured out’

    1. I added another chart as well. How about the interesting point that Vancouver is higher than SF or NYC? I don’t get what industry is supporting those prices. Do you?

      It’s never good to confuse brains w/ a bull market, and I try to tell myself this as my investments have gone up drastically. Hence posts such as, Practice Taking Profits To Pay For A Better Life (

      I do hope the party continues forever, but it’s unlikely.

      1. The average family income in Toronto is $75K, nowhere near the $150K-$200K in SF that Financial Samurai mentioned. So it is very possible that foreign buyers are driving up the prices. But since it’s not supported by income, that type of appreciation doesn’t last…as seen in Vancouver after the foreign buyer 15% tax. Ontario is now watching closely and contemplating bringing in the same tax.

        1. Mysticaltyger

          Actually San Francisco’s incomes aren’t anywhere near 150K either, but they are above 75K.

    2. The MAD Consultant

      The currency factor is a good point. Generally the relationship between currency and assets is like a teeter totter. As one rises the other drops and vice versa. So basically if your currency appreciates assets will have the propensity to fall. As the currency falls then generally asset prices will rise. A good example right now is Britain. The pound is falling but the FTSE has been rising. Now this relationship isn’t always linear, nor a strict correlation to every single asset class. It’s way more complex than that.

      I’ve also written how home ownership and real estate in general is not always the best investment. For professionals and people who put in the work and research absolutely there is money to be made. For everyone else the odds are stacked against you so you must do due diligence if you plan on investing, and not just having a place to live. Even then you must still be careful. I’ve seen plenty of people buying their “starter house” only to find out it’s their own black hole.

      Kudos to you for breaking free of all the obstacles and barriers and doing what you want.

      1. FIRECracker

        Thanks! And yes, I agree that for professionals and people who put in the work, you can make money in real-estate. The best examples are FS and Paula Pant.

    1. We do love our sweet sweet socialized healthcare. That beings said, once you retire your income essentially drops to 0, qualifying you for ACA/Obamacare in the States.

      1. Who wants to use Obamacare? It’s horrible.

        But your income isn’t 0, you have passive income from your portfolio. In the US, we tax that income, usually at higher rates.

  67. I rented most of my career, since we moved frequently, and then bought at exactly the wrong time– a decision that still sticks with me financially. There is much to appreciate here.

    That said, I wonder how this perspective changes as you age, have kids, live outside of cities, look for some stability in a place that you can make your own, etc.

    1. I’ve noticed a very heavy nesting instinct that kicks after the decision to have children is made. And then it kicks into overdrive once she is pregnant and has a child. You can nest in a rental, but does it feel the same?

      I also bought one property at the wrong time and regretted it then. But 9 years later, not so much anymore b/c where it is in Lake Tahoe is magical to us. So many fond memories, and the financial burden is small compared to my net worth now. I’m going to write more about how perspectives change the older we get in the future.

      How about?

      1. We rented for 10 years and love it. But now are homeowners with 5 kids at home. I wouldn’t mind renting again, if I planned on it being short term. But I have a big patch of raspberry bushes in the backyard, and would miss things like that. I would rent for a purpose, but not just because. Even moving down the street sounds like a huge hassle at this point.

    2. The nesting instinct is strong, but as someone who grew up in apartments, I really don’t think it’s a big deal. People keep saying they need a house because “kids need stability”, I get that, but renting doesn’t mean instability. What’s wrong with renting an apartment? Unlikely that the landlord will kick out the entire building to take advantage of home appreciation.

      Growing up, I had to learn to adapt and make new friends and I think that actually helped me become more resilient. If people want to buy a house for the stability of their kids, I completely understand. But that doesn’t mean if you don’t buy a house, your kids are doomed. If the trade off is working long hours to pay off a massive mortgage and never seeing your kids (like SO many of my ex co-workers) versus renting and spending more time with them, I’ll pick the 2nd option any day.

      1. I grew up in rentals (because my father was like you and didn’t believe in owning) and have been kicked out twice in my childhood, once from apartment and once from a house. Both times, the owners decided to sell (one because of debt- yes, they did kick out everyone, the other because they feel like it.) The more disruptive part of my childhood are the people coming in to see the house and you’ve no say in it because homeowners can enter the property whenever they want and of course, parents stressing out because now they’ve to find somewhere new to live. These memories of invasion of privacy and uncertainty stick for a lifetime. I’ve also known heirs of estates also selling and kicking the tenants out and other unforeseen circumstances.

        If you’re lucky to know and trust the owners, great. But just like all the caveats about buying a house in the right area, I think renting in the right areas is no less complicated especially if there are kids involved.


    And not just because I’m a renter too (though it is nice even without being financially free! :))

  69. The Alchemist

    Ummm… just how far into the 7 figures is she? Retiring at 31 and traveling the world sounds GREAT. But I’d think you need a lot more than just one million before pulling the plug so young. If you have, say, 5 million, maybe it works. What’s the realistic annual yield on a $5m portfolio? Can you live off of it for 60 years?

      1. Getting seriously hurt, not being able to work (or not able to find a job in a recession/depression), and running out of dough is the worst that can happen. It’s also a lot tougher to find 6 digit salary jobs if you have been out of the labor force for a considerable period of time (unless you’ve been sitting on Board seats).

        1. FIRECracker

          “Getting seriously hurt, not being able to work” that could happen if you’re working too. And just because you’re working doesn’t mean you won’t get laid off.

          I’d rather have a portfolio generating income rather than an unstable job and a house any day.

          Besides, once you become FI and leave the work force, it doesn’t mean you can’t choose to do side gigs. Just look at FS, he’s making MORE money after he quit than when he was working.

        2. Rob, why would you run out of money? I have 16x our initial spending budget. I have a 38% margin of safety, if my portfolio declines before my portfolio won’t be able to generate enough money to live off of, assuming historical stock market returns of 9.7%, which includes dividends.

          Why do you need a six figure job? Logic tells me that my replacement income needed is only the difference between what my portfolio generates and how much we spend. It’s an algebra equation, if one side is out of balance, you simply need to balance the other side.

          Why ever retire? In theory, there is never enough money. Most FIRE people on the internet wait too long. I’ll take my chances. My wife doesn’t work right now because I’m tied down full time. She wouldn’t mind working part time here and there. It won’t be necessary, and I could do the same as well if I needed to.

          1. FP – You or a family member could have a very expensive healthcare situation pop up, the stock market could drop 90%, hyperinflation could happen, there could be a one time massive tax on assets to pay down government debt, etc. There are a lot of (relatively unlikely) scenarios that could easily destroy your income producing assets. If you are very flexible with your budget, you are probably fine. However, if you are like me and want to maintain an upper middle class lifestyle for 40-50 years of retirement, you need a much larger cushion to “guarantee” that happening. And honestly, once you hit that big nut, working another 2-3 year’s isn’t that big a deal but you can usually add ~20-60% more to your nest egg in that time.

            RE: 100k job. I was responding to the previous person who just suggested if you run out of money, go back and get another $100k/yr job. My point was that is much harder to do if you’ve been out of the labor force for a long time.

            “Most FIRE people on the internet wait too long.”

            Debatable. The US has not had more than 2 down years in an economy for 70 years. How will FIRE people right at the edge handle another great depression? Or a scenario like Japan in the 80s were the stock market crashed 75%+ and still never returned. I also think some FIRE people could benefit from having some extra splurge money in retirement to do things they didn’t do while killing themselves while working to get to retirement.

            1. You could also drop dead at work, either tomorrow or in a few years from stress.

              I think what a lot of people who haven’t really traveled don’t realise is just how ridiculously cheap you can life *comfortably* in many countries.

              If you love working and love your job, keep doing it.
              For many of us, corporate life is a soul destroying half life of an existence. Personally, I’d rather live in a tent eating rice and beans for the rest of my life than have to work in it till I’m 65.

    1. FIRECracker

      I think you are correct that $1 Mill is not enough to retire in SF, NY, or other expensive cities. But now that I’m not tied to an expensive city for work, I can move anywhere I want. My hubby and I recently travelled the world for 1 year on $40K. So it’s absolutely do-able to live on less if you’re not in an expensive city. I also think that it’s easy for people to pick up side gig’s once they quit the 9 to 5. I mean, look at FS…he actually made MORE money after he left the corporate grid. So there are many knobs to turn.

  70. Wow, so sorry your parents have given you such a hard time. Good for you for sticking to what you feel is best for your own lifestyle and taking care of yourself. Congrats on achieving millionaire status as well!

    Is there a high percentage of foreign buyers in the Canadian real estate market? Maybe that’s a factor driving up prices? I’m not familiar with the market there at all.

    Best of luck with your journey. Sounds like you have an incredible amount of freedom!

    1. I think the foreign buyer factor in Canada is overblown. The real factors are:

      1) Loose lending standards, although not as loose as the U.S. pre-crash;
      2) and a common belief that real estate is “safe”, as in it will be higher in 10 years anyway.
      3) a belief that Canada is “different”, and thus immune of a US-style crash
      4) a strange comfort with very high debt levels, enabled by low interest rates.

      1. Is it overblown? Been reading more into the investor VISA and how that caused an influx of money into places like Vancouver.

      2. I found another chart that I added into the post regarding the price difference between US real estate and Canadian real estate. It shows Canada has a 41% higher average selling price. I don’t get it. Do you?

        Is it simply b/c Canada has a much smaller population? Taxes are higher, winters are longer and colder, there’s less innovation, oil has tanked. Something doesn’t add up.

        Maybe the US is simply much poorer due to a much larger population and swathe of land to build. Hence, shouldn’t this be a positive datapoint that the US is a land of greater opportunity if I’m a foreigner looking in?

        1. “Maybe the US is simply much poorer due to a much larger population and swathe of land to build”

          Maybe I read this wrong… But did you seriously think the US has a larger swathe of land? It doesn’t, take a look at a map.

          By the way, I always read your articles, just pointing this out so you know. Thanks for writing!

            1. I think you cut and paste the wrong link. That being said, you’re right about the population distribution… The vast majority is a short drive to the US border. Unfortunately you’re preaching to the choir and aren’t going to get a very different opinion from me… I’m Canadian. I moved to Seattle because I can get paid more (hugely more with the dollar difference), cost of living is lower, and quality of life is pretty similar. The biggest problem is my friends and family are still mostly in Van, but it’s a short drive and it’s why I’m here.

              I think the reason RE is so expensive in Vancouver is because of the unusable land. In the US if you want to live somewhere nice you have Cali, Florida, Hawaii… plus you have many other places where it’s nice year round, maybe not quite as nice as the previously listed. However, in Canada, if you don’t want to deal with hell freezing over in the Winter you have to either live in the greater Vancouver area, Vancouver Island, or be a snowbird (travel to the US in the winter… which is very common). People who live in Toronto/Montreal deal with a frigid winter and are the most populated cities… but you just don’t have the same choices so it raises prices.

              Anyways, I think it has to eventually decline in Vancouver… I believe that peoples wages eventually have to dictate the prices… but I’ve been waiting for that to happen for more than 10 years now.

              1. I replaced the link with the right one.

                Do you own or rent? Buying in Vancouver 10 years ago would have been nice! I wonder why more Canadians don’t move south to the US. There seems like so much more opportunity here (and cheaper places to live). Or is this too much US centric thinking? Of course it’s hard to leave one’s family and familiarity behind.

                You can start a new comment thread or respond to an older comment as this one is done.

    2. FIRECracker

      Thanks! And yes the freedom is incredible! ( I didn’t realize how much I’d love it until I actually quit my job)

      No one knows for sure whether it’s the foreign buyers driving up the market. They did a study in Vancouver and it said 10% of all homes bought by foreign buyers (but this doesn’t include Canadians who have a working spouse in China, sending money back).

      Recently the BC government applied a 15% foreign buyers tax, and now the housing market seems to have seized up. Sales dropped around 80%. This seems to indicate that foreign buyers are the main reason for the unsustainable prices.

      1. Oh wow, 80% drop. But did the price dropped too or just the number of sales? The housing market is nuts up there.

          1. FIRECracker

            You’re right. My bad. It is 26%, not 80%.

            And in response to Joe, it’s the number of sales not prices. As they say, real-estate prices are sticky coming down. But having sales seize up like that is never a good sign.

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