Let’s Start a HouseFIRE!

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You already know about FIRE (Financial Independence, Retiring Early). Heck, you might even know about LeanFIRE and FatFIRE — retiring with the expectation of spending <$40,000/year or >$100,000/year, respectively. You probably even know about CoastFIRE! Well, allow me to add more fuel to the FIRE! This post is all about “HouseFIRE”, and why you should care.

So what is HouseFIRE? Simply defined, it’s the stage you reach when you can retire from work just by utilizing your available real estate for money. That link has loads of tips, but if you’re a Vancouverite, you might have to get more extreme. Since I wrote this post, Vancouver’s average rent for a 2-bedroom unit has ballooned to $3,130, and landing even 1,000 square feet for that is near impossible! If you want to attempt HouseFIRE, you’ll need actual space. For that to happen, high-cost-of-living areas won’t work great, but nearby neighbourhoods might. You may find yourself with lots of space for the same housing cost just one town over! Here’s how I do it.

My $170,000 99-year leasehold is paid off, and it’s mere minutes from Vancouver. I have it until 2087, and the total from strata fees and property taxes amounts to $650/month (which I know is high). It’s a 3-bedroom condo, but one bedroom is currently an office for my photography business. I have the master bedroom, and a roommate lives in the remaining room. His rent covers the $650 I mentioned. My plan now is to relocate my office to our underutilized living room, and I’m turning the old office back into a bedroom I can rent out. When that’s finalized in March, I’ll be collecting $600/month on both rooms for $1,200 total. My strata obligations will most likely be near $700 by then, but I’m still looking at $500+ in profit! If I could live like “A” did, I’d be HouseFIREd! (“A” was living on $700/month, and paying $200 for rent. $500 for her other expenses covered it all!)

There are even people in my family who could be HouseFIREd. Mom, for instance, lives alone in a 4-bedroom townhome. If she took the master room for herself and rented the other three rooms to students, that could mean $1,800/month! If they chip in for utilities, that reduces her expenses even more! I think $1,800/month is perfect to live on. That’s about in line with what I spend now!

This is a great strategy for empty nesters. Instead of downsizing, they can maintain the value in their appreciating property, and have a source of extra income. Instead of thinking about retirement in just dollars, consider HouseFIRE! Can you retire on square footage alone? I bet some of you already can. Do it.

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Space Is Your Greatest Asset

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Everywhere you look now, space is at a premium. Parking a car in Vancouver for three hours can set you back $21. Fifty square feet of storage in Toronto can cost you $193/month. According to Rentseeker, my 3-bedroom in Richmond would rent for $1,644! Somehow, we’ve all just accepted that space is expensive, even though the price for renting that space is often flat-out stupid! What if we decided to end the madness? What if, instead of being gouged for square footage, we found a way to make our existing space work for us instead of the other way around? Well, listed below are a few ways you can cash in. You don’t need to live in a mansion either. I’m just a regular guy who recognized an opportunity. You might realize there’s been a cash cow in your backyard all along.

First, the obvious: Get roommates. You don’t have to live alone. I’ve done the math, and by March 2018, I’ll be back to “no rent and no bills” because of what I make from them. I’m sacrificing my home office to make it work, but not really. I’m just moving my office to my currently underutilized living room. To get even more advanced, consider getting into Airbnb if you have a spare room! Here’s an article about it. For the nitty-gritty, here’s another! If that all sounds too stressful, rent to friends because you can still make extra cash in unique circumstances. We still “put people up in our storage closet for about $300/month”, and my friends all know they can come to me if things ever get weird, like if they suddenly get evicted or a relationship splits up. This was my first step. If you’re willing to bring other people into your space, you can profit immensely.

In another example, this book describes how its author uses an MRP (Multi-unit Residential Property) to live rent-free. He even advocates going as extreme as buying a fourplex, renting out three units, and living in only one! In 1999 though, he bought his first duplex and started paying into it. The property was $109,000 in Calexico, CA and his monthly payment was around $900. He lived in one apartment and rented the other for $800/month. That $800 plus his $100 “rent” went straight into home equity! I suspect he’s doing quite well now. This is common and basic optimization of real estate. You probably know a bunch of people doing something similar right now.

I also discovered you don’t need a full room or apartment available to make money. When my dad died, I sold my van, took over his car, and now my parents’ two-car garage in New Westminster has one space open. (I live a few towns over in Richmond.) Remember how expensive storage can be? Well, I know someone desperately in need of storage space. Instead of gouging them though, I’m letting them use that space for $50/month. It’s slightly less convenient for everyone because I’d have to accompany them whenever they need access, but they’d save (and I’d earn) hundreds! It’s win-win because I get to profit, they get to save, and I’ve effectively done a favour for them! It’s great!

Live near an event space? Here in Vancouver, near our local fairgrounds, residents open up their driveways for people to park. Last I checked, the fair itself charges $20 for parking, so let’s say we charge $15/car. Well, if you have a property width of 14.5 metres and a large enough backyard, YOU CAN PARK FIVE VEHICLES LEGALLY. $75/day for a month? That’s over $2,000! Everyone should be doing something like this! You can even monetize a small patch of dirt on the sunny side of your building! I’d gladly pay $50 for a garden space during the summer if I didn’t already have one. We all have access to space that’s “ours”, so let’s use it!

These are just a few examples, but every bit of space in your home should have a job. Let it make money for you. I’m a few thousand richer every year because I abide by that. Can you do the same and live rent-free? Tell us in the comments.

Don’t Count On An Inheritance

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This summer, I visited Kamloops, BC and went on a hike with “Ben and Barbara”. We didn’t start out talking about personal finance, but when I bought a used copy of “Your Money or Your Life” at a local bookstore, we ended up in a deep conversation about cash, happy living, and planning for end-of-life care. It was the most enlightening conversation I’d had all year.

We were driving back to their place from Salmon Arm when I started talking about my retirement plan. Foolishly, I expected a small inheritance from my family someday. After all, we had a townhome in the family I estimated to be worth $450,000. My brother might decide to start a family there, but I reasoned I could at least rent out the basement to a student for $800/month. My brother and his family could take the top two floors and live just fine. Obviously, I wouldn’t move in because I don’t have rent in Richmond anyway, so I’d just hang out at my current place and pocket the rent. Easy peasy. We drove on, and I took in the scenery. Then, she dropped the bomb.

“Have you considered end-of-life care for your mother?” Barbara asked.

“No,” I admitted.

“Well, you should. End-of-life care can get expensive, especially when it comes to memory care. There may be money in your family, but it’s your mother’s money first. You may need to liquidate the home to pay for that. Don’t count on an inheritance.”

Her words hit me like a freight train. She was right. It was only days ago I was talking with a coworker about HER mother’s end-of-life care. We were considering using Nurse Next Door, so I’d researched the cost. Estimates were between $550/month for basic care to $4,000/month for “vital care”. Senior housing was even worse, with assisted living in BC at an average of $2,747/month, and memory care at $5,720/month! If your mom has Alzheimer’s, expect to pay $68,640/year while she’s living in a home. My family’s $450,000 townhome suddenly becomes 6.5 years of memory care in a retirement facility! Well… fuck.

Listen, I know you care about your parents. I do too. I’m not writing this to scare you, but I want to prepare you for the reality of end-of-life care. If you thought you were getting an inheritance, you probably aren’t. Your parents’ money is theirs first. Instead, prepare for your own financial future by investing appropriately, and not spending all your money buying shiny shit. The wealth your parents built up is for them to use, not you. Also, did you know average life expectancy in Canada is now 80-84? Let’s not mince words: If you were counting on an inheritance and you’re not already ridiculously rich, YOU’RE FUCKED. Start saving. Prepare, not just for your future, but also your parents’. Invest wisely, and maybe you’ll come out okay. You have been warned.

Sorry to ruin your day. Here’s a picture of a cute cat.

Livin’ la Vida Local

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Any place you go to regularly should be within walking distance of your home. Otherwise, you’re being wasteful. Too harsh? Read on. I might just convince you to move.

Remember when I told you all about my home? As awesome as it is already, I forgot to tell you about its OTHER awesome benefit. IT’S CLOSE TO LITERALLY FUCKING EVERYTHING. I’m not kidding! Within a block, here’s the list of everything I’ve got: a Safeway, a Shoppers, a produce store, a pizza joint, an Italian restaurant, two places to get your hair cut, a post office, a neighbourhood pub, an RBC (my bank), a TD (my roommate’s bank), a liquor store, a bakery, a Subway, an AWESOME sushi restaurant, a phở place, a walk-in clinic, numerous dentists, a gas station, and a 7-Eleven. Did I miss anything? Probably! I live next to an urban oasis. If I want beef teriyaki at 4 in the morning, I can make it happen. It’s a goddamn paradise.

The only thing that isn’t close is the liquor store I work at part-time, and even then, it’s 6 KM away and on a bus route. I drive there, but it only costs me $1.20 there and back since my 2008 Corolla sips fuel. It’s actually cheaper than taking the bus since I live so close! Did you know the average Canadian commute costs $7,540/year? That’s the equivalent of 6,283 there-and-back commutes for me! WHY THE FUCK ARE YOU ALL COMMUTING SO MUCH?!?

The best part about choosing a great neighbourhood is having an expanded radius of comfort. If you live in the suburbs, your radius of comfort is likely limited to your own home. Every time you need something, you have to leave your bubble. Whoops, forgot the mustard! See you all in half an hour! Choosing to live near places you need is entirely different. With a Safeway across the street, my “fuck, I forgot the mustard” moments are minor inconveniences instead of an ordeal. Also, the pub across the street is practically an extension of my living room! Don’t feel like entertaining 20 people because they might trash my place while drunk? Take ‘em to the pub! It’s insane how much my new place has simplified my life. I don’t even know how much I’m saving by living here instead of deep in the suburbs like I used to, but I’m sure it numbers in the thousands each year. Live close to the places you use. Drive less. Move if you have to.

You’ll have to find a balance though. It’s likely rent will be higher in convenient areas, so you’ll have to do some math to see if it’s worth it. Then again, my ex-girlfriend used to live here for $316.81, so it’s possible to get the best of both worlds. You just have to do your homework. Also, choose jobs that are close to you. Each mile you live from work costs you $795 in commuting expenses per year.

Where do you go most often? Can you live closer? Tell us on our Facebook.

My 99-Year Leasehold and Why It’s Fucking Awesome

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Here, read this.

Are you back? Good. Most people aren’t even aware of 99-year leaseholds. If this sounds right for you, like if you never intend to have kids, I may have just saved you a few hundred thousand. Buy me a beer sometime!

Anyway, I have an enviable Home for my age. I’m 27 and I have 71+ years of Rent paid off with my leasehold. That’s what 99-year leaseholds are: paying ≤99 years of Rent all in one go, and reaping the benefits of Home Ownership. Mine worked out to $170,000, or $199.53/month. I own my property and the right to live there until 2087. Technically, I don’t own the land underneath it, but I’ll be dead by 99 and really don’t care. I’ll never need a mortgage, and I’ll never need a freehold. I don’t plan on having kids. I guess I’m set! Even if I change my mind and sell the remaining years when I’m 65, there’ll still be 33+ years left on the lease! I estimate I’ll be able to get AT LEAST $120,000 for the remaining years. $50,000 to live somewhere for 38 years? That’s $109.65/month.

Wait, it gets crazier. My place is over 1,000 square feet and has two bedrooms. My girlfriend’s moving in on May 1, and with my current roommate staying, I’ll be collecting $950.43 from them in Rent. $633.62 of that gets eaten up by miscellaneous building maintenance fees, and the remaining $316.81 pays literally ALL MY BILLS. Electrics, Internet, Netflix, Rogers. Right now, I have zero Expenses aside from Food, Alcohol and Entertainment, and I was able to pull it off with my Rental Property.

A key thing to note about this is you don’t live forever. Take a moment and ask yourself why you REALLY want to own your place, freehold and all. Is it an investment? Is it for status? Are you hoping to pass it down? Now ask yourself: Is this worth extending your career OVER 33% MORE?

My Home is modest. It probably wouldn’t impress anyone. Secretly, that’s another reason it rocks. We’ve already talked about how Shiny Things Are Stupid, and that applies DOUBLY to a Home. Realistically, even if you were the friendliest gal in town and you loved showing off your place, you’d invite maybe 100 different people to it over a number of years. Is having an expensive Home – and in Vancouver, we’re talking at least $1M – worth briefly impressing 100 people? There’s always the argument that it’s not about THEM, it’s about YOU, but isn’t that even dumber? WHY WOULD YOU SPEND A 40+ YEAR CAREER MAKING $1M JUST SO YOU CAN MAKE COFFEE ON A GRANITE COUNTERTOP? FYI, poor people drink the same damn coffee. You’d be happier with more Time and Experiences, not heated toilet seats. Snap out of it.

The insane thing is I’m not even leveraging my Home to its full potential. I sometimes leave the country for weeks at a time and I’ve been told I should Airbnb my place out to make even more Money while I Travel. I COULD GET PAID TO TRAVEL. You can too! Read this.

Home Ownership isn’t black and white. 99-year leaseholds are the happy grey area where dreams are made. It seems silly to me that someone would spend their entire Life working towards a beautiful Home only to live there for 10 years before they croak. Wouldn’t it be better to have an average leasehold Home and shorten your Career voluntarily?

Additional perspective: You may “own” 2,500 square feet someday but outside, there are 197 million square MILES that you can explore. Guess what? Those 197 million square miles look the same to you as they do to Bill Gates.

Go outside. You must already be rich as fuck if you share 197 million square miles with Bill Effing Gates. Just remember, you owe me a beer.