Chapter 1 : Interview with Alex Avery, Author of The Wealthy Renter. â Passionate Bibliophile The Wealthy Renter is an interesting and provocative read. Alex Avery writes for "every man". He is providing an overview of the economics of renting versus owning and he makes his "pitch" alluring with his "cheeky" writing style that is effective in holding your interest. Published June 12, Alex Avery worked as a top-ranked institutional equity research analyst, who advised institutional investors on real estate investments. The date and time of the interview was May 22, Tuesday The duration of the interview was 21 minutes and 50 seconds. Which school did you go to? How did you get into personal finance and real estate? I went to McMaster University and I took an engineering and management program, which is essentially a double major in engineering and business. While I was doing that MBA program, I worked at a company called Altus Group, which focused on valuation and Market data for the real estate market and from there, I found my way into equity research studying real estate. How long ago was this? When did you graduate? I graduated from McMaster in and What led you to write this book? And being social people, we would end up talking to the couple at the next table or the waiter. When you meet new people, people often ask what do you do? I would say I work at the bank and that usually killed the conversation. But for those who ask the next question, which was what do you do at the bank? I would say I am a real estate analyst and even though that had an entirely different meaning than what most people thought, their next question was should I buy a house? That was not my focus but I ended up having lots of conversation about housing and what I found in those years was that a lot of these people, generally younger people had very distorted views of what home ownership was about. I came to sort of see patterns in these conversations and these misconceptions that people have. So, I started writing them down just because I found them interesting ideas. After a few years of writing them down and then, writing down the misconception and thinking through how that misconception came to be and what the reality was. I started to see this pattern where you could see the effect of what is a really pro home ownership lobby for a lack of a better description, influencing the way that young people made housing decisions. But, then an interesting thing happened. My wife and I had twins in And, pretty soon we really wanted to buy a house even though I had basically written a book about how it is a bad investment. And, then ended up at the end of reconnecting with the publisher and publishing the book in the fall of When you say young people, you mean millennials like people from age 20â 37? At the time, I was one of those young people. Whether to buy or to rent and then, where you are locating. It provides a lot of flexibility. What are some of the reactions you have received from your readers? Everyone believes that they are an expert in housing whether they express it that way or not. A lot of people believe that home ownership is the best investment that you could ever make because particularly in markets like Toronto or Vancouver where people bought houses 5 or 10 years ago and you know on paper made huge gains. Perhaps comprising the majority of their net worth now, they think that that was a very smart decision that they made. They made a lot of money and for anyone to say the opposite is heresy. I have had the discipline to save through other means to accumulate retirement wealth. A woman that I worked with who was basically retired found herself living alone in a sq ft home, sold it for 5 million dollars and the sense of relief that she had with that was enormous because she took that money and put it into dividend producing investments and ended up having so much free cash flow. She no longer had the burden of maintaining a sq ft house and had a lot more flexibility and a lot less stress in her life. What are one to three books that have greatly influenced your life? Well, The Wealthy Barber. I did talk to David Chilton when I was putting my book together and he was very supportive and encouraging. Did he give you the green light for the title of your book? Laughs So, that was one. Let me just think about that. No problem, we can come back. In your book, you talk about how the governments of virtually every developed country in the world have stepped into the business of promoting home ownership. How has the Canadian government been doing this? The government promotes home ownership through a variety of policies that are designed to encourage home ownership. If you buy a house and you are a first time homebuyer, you get a rebate on your land transfer tax, there are no capital gains on a principal residence. A society of homeowners generally is more productive if you have a mortgage, Page 1
you tend to go to work everyday. You have got a big shiny thing that you want to protect. You tend to not commit as many crimes. There are all sorts of very positive dynamics associated with home ownership. So, there are a lot of different methods through which they promote home ownership and politicians will very overtly target rising home ownership as a policy target. Because generally speaking if you know home ownership is rising, you have got lots of construction activity, the economy is doing well and voters are more likely to support an incumbent politician if home ownership is rising and if the economy is doing well. George Bush in made some pretty incredible pro home ownership policy changes and the announcements and those were directly contributing to the housing crash that happened in the United States in through Funny enough in, when Harper was trying to get elected for a final time, which was unsuccessful. One of his last-ditch policy moves was to promise that he would target increasing home ownership to I think it was 72 and a half percent. Comment below why you own a house or why you are renting. You will be placed in a draw to win a free copy of The Wealthy Renter. I am giving away both copies. At my workplace, I talk to my co-workers especially senior nurses and when there is a discussion about home ownership versus renting, they usually tell me how when you pay for your mortgage, it is kind of like forced savings. And, perhaps the number one argument against home ownership as a forced savings program is that it has all sorts of ancillary effects on the rest of your life. You have reduced labour mobility, you have reduced flexibility in terms of what job you would take, not necessarily what city you might live in. I guess the only real difference is that the home ownership forced savings program is very very powerful in terms of making people stick with the forced savings program. And part of that is the high transaction costs on buying and selling houses but also the fact that you live in this forced savings program. How do you invest your money? We have recently launched a fund focused on real estate securities in North America, long and short and the underlying entities all have the common theme of being real estate-related. It might surprise people but we actually own our house as well which is a pretty sizable investment given the Toronto housing market. Lastly, what are bad recommendations you hear in your profession or area of expertise? What advice should Canadians ignore? I think one of the common beliefs around housing is that house prices always go up. It just so happens that the lot of the media attention is focused on the ones where those prices go up consistently and to follow that investment maxim that house prices always go up can put you out a lot of risk. I think personal finance education is underserved in Canada. In fact, that was one of the objectives of The Wealthy Renter was to help people understand housing a little bit better. So, I would say educating yourself in personal finance is important to understanding the investment industry. And even if you are, it is really beneficial to understand as much as you can about finance. The Wealthy Renter plays a small part in that and helping people better understand the financial elements of principal residences. Would you like to take a stab at one to three books that have greatly influenced your life before I let you go? Yes, so I think The Wealthy Barber is one. Manufacturing Consent is a fairly socialist perspective on the way that the capitalist society influences things like politics and all sorts of elements of society. Thank you so much for your time, Alex. Page 2
Chapter 2 : The Wealthy Renter - Abacus Wealth Partners n a society that's obsessed with real estate in general and home ownership in particular you wonder if Alex Avery's The Wealthy Renter makes sense. "Renting is the unsung hero of the housing world, renting is beautiful in its simplicity. November 29, at 4: November 29, at 5: Lord Blankfein November 29, at 9: This is typically two working professionals each making six figures. The South Bay is filled with these people. I have lots of engineers in my neighborhood aerospace, petroleum, etc. People like this will only live in certain areas of the cityâ and these areas are expensive. Skylander Not all professionals only marry other professionals, LB. And in many households, one will often quit working to raise a family. SoCalGuy November 30, at We are just a number. FutureBuyer December 1, at We crack over K but varies a bit depending on bonuses. A lot of people out of Grad school got 90k jobs, a few years ago so I have no doubt most of them are over the k mark by now. The one thing in common is that they have advanced degrees or are entrepreneurs, no one makes k sitting on a couch unless you have some odd job that pays you to lay around. Anyways, point being is that many people can make k if you have a two professionals working. Most of these people have to work hard though and requires many hours, no one pays you for nothing. Haley mumbo, I work at a company with about employees and personally know several, non executives that make about k year. Samantha December 1, at 3: Most planes are flown on autopilot nowâ what happens when airlines decide to make eliminate pilots and rely on computerized flights entirely? Planes that fly themselves is inevitable in a world of self-driving cars and automated shipping. SoCalGuy December 1, at 9: Computers have reduced fatigue and workload while increasing safety. What I get paid for now is management skills and above all else, good judgement. When computer artificial intelligence gets good enough to replace me then every job is in danger. The funny thing is people have no idea how old our infrastructure really is and what it would cost to develop this autonomous system you are proposing. How do you think these planes keep disappearing in S. Asia without a trace? Hundreds of people in a metal bird barreling through the sky close to the speed of sound without a human at the controls? Not happening anytime soon. Besides, we have a binding contract and the airline is making billions right now. If I had to do it all over again I would have been a harbor pilot. What I get paid for is good judgement. When artificial intelligence matches that of a human we are all in trouble. We live in a first world country but use technology to control the skies developed in the 50s. And never mind us, look at the rest of the world. How do you think these planes keep disappearing in SE Asia without a trace? Sure, it will keep you in the lane, match speeds in traffic, etc. John D December 2, at 7: The planes can easily be retrofitted. Molo December 1, at 4: Most of my single techie friends would rather rent and put the money into stocks in order to remain mobile. It was at least 10 years from gentrifying. Is it because buyers can make money renting to section 8? Page 3
Chapter 3 : Michael James on Money: The Wealthy Renter A National Bestseller! Why be house poor when you can rent rich? "Why rent when you can buy?" More than any other, this phrase captures the overwhelmingly unanimous promotion of home ownership to Canadians. The author is Alex Avery, who is well qualified to write on the topic of buying versus renting. The book arrives at a time when renting increasingly makes sense as an alternative to buying into the expensive housing markets in some cities. Story continues below advertisement Why are Canadians so obsessed with home ownership? Is it just the way prices have soared in some cities? Home ownership is widely regarded as being the only sensible choice. That view is pushed by real estate agents, by lenders, parents, friends, family. Even the government of Canada promotes home ownership. This really drowns out anyone who is talking about the positives of renting. You say in the book that "renting is a beautiful thing. The real reason that Canadians have such a negative view of renting is the inaccurate characterization of renting as throwing your money away. Part of the gap between popular opinion and reality on renting is a lack of understanding of the cost of owning a home. Story continues below advertisement Story continues below advertisement Can you give us an estimate of how much it costs to own a house, beyond the mortgage? In the book, I use a conservative estimate of 1 per cent of the value of a home [on average per year]. But you might want to use 2 or 3 per cent, just to build in a buffer. What about the idea of home ownership as a forced savings plan? For 25 years, you will make a large payment toward paying down the balance on your mortgage. Story continues below advertisement But you can sell a principal residence tax-free. If you wait 25 years, the impact of capital gains tax on your investment returns is actually a lot less than people expect it to be. What do renters have to do to become rich? They need to have the discipline to commit to a savings plan. If you have it, you can outperform the experience of a homeowner by investing. For Canadians who lack the ability and discipline to commit to a savings program, housing is a nice fail-safe for them. One of the problems of renting is that low vacancy rates in some cities are making it hard to find affordable places to live. Can you give millennials a smart, shut-them-down response to people who disrespect renting? Tell them you invest the savings you get from renting, you have more money to enjoy life and you have less stress. Renting is clean, easy and affordable. Finally, I have to ask this. Are you a renter? My wife and I rented for 15 years and now we own. We bought after we had kids. Follow Rob Carrick on Twitter rcarrick. Page 4
Chapter 4 : â Renting is a beautiful thingâ : The case against home ownership - The Globe and Mail The true cost is rent vs. mortgage payment, property tax, repairs, maintenance and buying/selling costs, just to name a few. Factor in that most buyers will stay in their house for 10+ years, and owning starts to look unnecessarily expensive. Alex Avery decided to make a case for renting in his book The Wealthy Renter: His reasonable and balanced analysis contrasts sharply with the usual cheerleading for owning a house. Typically, renters pay for little other than their rent â maybe a few utilities. Homeowners pay property taxes, maintenance costs, utilities, insurance, and an opportunity cost on home equity. Some might object that homeowners can look forward to gains on the value of their home. However, this analysis is based on low-cost methods of investing in the stock market. A homeowner might proudly say that his home has tripled in value, but he forgets inflation and all the money he spent on property taxes, maintenance, and other costs. Minimizing consumption of housing is crucial to building wealth. Toronto house prices are at 40 times annual rents, which is very high. What has really allowed homeowners to do well, Avery explains, is leverage. Investing in a house with borrowed money amplifies returns. Of course, stock investors can use leverage too. But leverage comes with risks, whether investing in stocks or a house. So is buying a house to get into the market. The exciting job you start with can end up being a trap if you build a lifestyle that needs your full income. Having a huge mortgage can leave you biting your tongue at work for fear of upsetting the boss and losing your job. One of the claimed benefits of owning a house is the forced savings. This is true to a point. If you rent and just spend all your income, you could end up worse off than a homeowner. Avery explains several ways to automate your savings. So, why is there so much cheerleading for owning a home and almost none for renting? Unlike most promotion of owning, the author is not a cheerleader for renting. He acknowledges advantages and disadvantages on both sides. I recommend this book to anyone struggling with a decision of whether to buy a home or rent. But a landlord might include allowance for some of these costs in the asking rent. The maintenance cost range goes too high as well. Chapter 5 : The Wealthy Renter - Timberland Regional Library - OverDrive It's a new book called The Wealthy Renter that will be published Sept. The author is Alex Avery, who is well qualified to write on the topic of buying versus renting. Chapter 6 : The Wealthy Renter: How to Choose Housing That Will Make You Rich by Alex Avery The Wealthy Renter It seems that everyone wants you to buy a house: your parents, real estate firms, mortgage brokers, and even the government. Alex Avery decided to make a case for renting in his book The Wealthy Renter: How to Choose Housing That Will Make You Rich. Chapter 7 : The Wealthy Renter PDF There's a cure for this nation's narrow-mindedness about renting instead of owning a home. It's a new book called The Wealthy Renter.(Globe and Mail)A good read filled with lots of facts, perspective, and questioning of the status quo. Page 5