Saving For A Down Payment In An Expensive Real Estate Market - Part 2

[00:00:01] This is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger

[00:00:14] Welcome back to the Canadian Investor Podcast. I'm here with Dan, not Dan Kent, Dan Foch from the Canadian Real Estate Investor Podcast. We're doing our second part on investing to build a down payment for a property to purchase, whether it's a home or an investment property.

[00:00:34] So we talked about the type of registered vehicles that you can have access to in the part one of the episode that is on the Canadian Real Estate Investor Podcast.

[00:00:44] So if you haven't listened to that episode, stop right now, go listen to it. It will be in the show notes, the link and then come back and listen to Dan provide his infinite knowledge on real estate.

[00:00:57] Yeah, yeah, I'd really appreciate the less exciting Dan here, but yeah, we would really appreciate if anybody who's interested would take a listen to our first half of the episode and tune into some of the other episodes on the Canadian Real Estate Investor stream.

[00:01:13] You might find them interesting. We talk a lot about mortgage rules, a lot about mortgage rates and kind of debt markets and macro, especially because I mean, international capital flows have a really big role in Canadian real estate because of foreign investment.

[00:01:25] And so, yeah, we take a little bit of an interesting spin on it.

[00:01:29] Yeah, unless you find this small town in Canada that no one knows, then maybe it doesn't have as much of an impact.

[00:01:35] But we finished the last one with the taxable accounts or, you know, margin accounts or basically the non-registered account.

[00:01:43] Now we're going to look at the different strategies that you can use to build a down payment to purchase a property.

[00:01:49] It'll depend on a variety of factors.

[00:01:53] So the three main ones, at least in my opinion, are how much money can you save towards a down payment each year?

[00:02:00] How large of a down payment will you realistically require?

[00:02:04] And obviously, you know, this it's hard to say, right, because the market does move.

[00:02:09] And of course, as we've seen recently, government regulation and requirements can move pretty quickly as well.

[00:02:16] Do you need, for example, to get 15,000 for a down payment or do you need 100 or even more 100,000?

[00:02:22] So that'll make a big difference on, you know, what you'll do in terms of in terms of investment in those accounts while you build a down payment.

[00:02:30] And when would you like to purchase the home?

[00:02:33] So in other words, how much time do you have to make the money grow?

[00:02:36] So those are three factors that will have a big impact on the different type of strategies to use.

[00:02:42] Why? Because I think it's pretty simple.

[00:02:45] Say you're likely to qualify on an income basis for purchasing a home, but you just don't have the down payment yet.

[00:02:51] Well, the homes you're looking at will likely require a down payment of 100,000 or more.

[00:02:57] And you're looking to purchase a home in 10 years.

[00:02:59] So let's say that's your situation here.

[00:03:01] Well, first of all, it's going to vary depending how much money you can save, especially if you're starting from zero, from not much of a base.

[00:03:09] Say you only have $250 a month, $3,000 a year towards a down payment.

[00:03:14] Well, if you're, you know, if you put your money in a savings account, I think you know then that you'll probably, you'll fall way short of your $100,000 goal.

[00:03:23] It's pretty tough to beat inflation in today's market.

[00:03:26] I mean, even with the inflation coming down, I still think that, you know, the cumulative inflation of price increases on the cost of living that the average person, it's so hard to save enough when you're not making substantial returns.

[00:03:43] Like your money has to be working for you in order for you to beat the cost of living and the market and inflation right now, I think.

[00:03:50] Yeah, exactly.

[00:03:51] And in this situation, I said, so after 10 years, let's just say you're getting 4% on your cash, right?

[00:03:58] Which is no guarantee.

[00:03:59] It could be less.

[00:04:00] It could be more as we've seen recently.

[00:04:02] Well, in 10 years, you'll get roughly $37,000 in your savings account that pays 4%.

[00:04:07] So you're clearly falling way short of that $100,000.

[00:04:11] If you do this, then you'll have to, essentially you'll have to choose between two outcomes.

[00:04:17] Nothing changes and you fall short.

[00:04:19] Or two, you're able to increase your savings per month during the time period and get some kind of windfall.

[00:04:25] You know, bank of mom and dad, inheritance, whatever it is.

[00:04:29] You know, if you're going to just use a savings account, these would be the two options.

[00:04:33] But of course, the last one that you could decide to do, and I know you have other ideas for that,

[00:04:39] but you could also decide to move from the GTA, for example, to a location if you're, you know,

[00:04:47] you don't require to be physically in the office.

[00:04:49] You can work remotely to a location that is much less expensive than the GTA, for example.

[00:04:56] Yeah, I think we had a handful of different kind of ideas on how to deal with it.

[00:05:01] If somebody really wants exposure to real estate, either they own a house or, I mean, we talk to,

[00:05:08] I mean, Nick, my co-host on the Canadian Real Estate Investor Podcast,

[00:05:10] like he doesn't own his primary residence,

[00:05:13] and he owns more real estate than most people that I know.

[00:05:16] And so you can still get exposure to the real estate asset without it being your house.

[00:05:21] You know, for him, he lives in the city, can't really make the business case of owning a condo.

[00:05:25] When you think about condo fees, you know, the cost of borrowing, down payment, et cetera,

[00:05:32] you can rent a condo for lower than that, the total cost of ownership,

[00:05:37] if you were to buy it today, which is pretty wild.

[00:05:39] And so he can stay close to the action and have the same quality of life

[00:05:45] while keeping his capital free to invest elsewhere.

[00:05:48] And so he does what he calls long distance investing.

[00:05:50] So that's one way to get exposure to real estate.

[00:05:52] And there's a couple of other strategies, which I'll talk about towards the end of the episode.

[00:05:56] But things like, I mean, the government just made it easier to do what you hear called house hacking.

[00:06:00] They basically made it so that they're going to allow Canadians to actually put units in their houses

[00:06:07] and get better debt, more favorable debt programs to do that.

[00:06:12] And so that's kind of a blended strategy where you get the investment and the house all in one, right?

[00:06:17] Just got to lever up.

[00:06:20] Apparently, according to CMHC.

[00:06:23] Yeah, exactly.

[00:06:23] And I thought you were going to refer to Nick as the Batman, but I guess that's an old joke.

[00:06:29] Yeah.

[00:06:29] It's a couple of years old, but I guess the second scenario, right?

[00:06:33] So I'm just going to I'm giving these two scenarios just to show the different kind of situations people could be in.

[00:06:38] So same situation.

[00:06:39] You want to save up one hundred thousand over the next 10 years.

[00:06:43] You're starting from zero, but you can contribute seven hundred dollars a month or eighty four hundred dollars a year.

[00:06:49] Well, if you have that four percent interest in your savings account, you actually end the period with one hundred and three thousand.

[00:06:55] So obviously, you know, there could be home inflation.

[00:06:58] You could require a higher down payment.

[00:07:01] It's a long time period.

[00:07:02] I do understand it.

[00:07:03] But, you know, if you're in the second situation, you definitely have a more realistic chance of achieving your goal without taking that much risk.

[00:07:13] Essentially, you know, the biggest risk you're you're taking here is that inflation really picks up and you're not keeping up with inflation.

[00:07:20] So that is something to consider.

[00:07:22] But, you know, there are other things to look into.

[00:07:26] So what other options if you're likely to fall way short of your required down payment?

[00:07:32] Well, the first one and the one that will likely make the biggest difference.

[00:07:36] And I did an episode recently, got a lot of traction is, you know, just make more money and increase your savings rate.

[00:07:43] So I know it's easier said than done, especially in this kind of climate.

[00:07:47] You know, it's not as easy to ask for raises or look for a second jobs or, you know, gig work.

[00:07:55] But that is something you could look into.

[00:07:57] It could also be that, you know, maybe you were single and now you have a partner and you're simply able to save more on two incomes.

[00:08:04] Right.

[00:08:05] Things like that can happen.

[00:08:06] Second is cut your expenses.

[00:08:08] We talked about eating Kraft dinner.

[00:08:10] Well, you know, reduce your life expectancy and eat cheap food.

[00:08:13] And that would be another option.

[00:08:14] Yeah, that's like that's the way I play golf.

[00:08:17] It's like, you know, you want to get a better score.

[00:08:19] You just have to play fewer holes.

[00:08:20] Yeah, exactly.

[00:08:21] That's it.

[00:08:21] So maybe it means getting a roommate.

[00:08:24] I mean, obviously, you guys talk about house hacking for a period of time so that your expenses are reduced and you're able to put more towards your down payment.

[00:08:32] You can definitely, you know, get creative trying to come by.

[00:08:35] Maybe you get a little bit from the first one and the second one here.

[00:08:39] Consider a property that's less expensive in your current city.

[00:08:42] You know, maybe you look for a fixer upper.

[00:08:44] Maybe you look at condos.

[00:08:46] Maybe you look at an area that's less expensive or the classic up and coming area.

[00:08:53] Sometimes they just end up staying up and coming for a very long time.

[00:08:57] But, you know, that's something you can look at.

[00:08:59] Consider moving cities like I mentioned earlier to a city that's more affordable.

[00:09:04] I could also being, you know, a bit less central moving more in the suburbs where the prices are more affordable.

[00:09:09] Hope that real estate prices fall sufficiently enough that you'll be enough to have a down payment or hope for new government measures that may help you purchase a property.

[00:09:19] And I put the last two because at the end of the day, hope is not really a strategy.

[00:09:24] But I think, unfortunately, it's a reflection of high or high home prices and how unaffordable they are right now that I think a lot of people feel like, yeah, that's the main strategy is just hope right now.

[00:09:40] Yeah, I think or the opposite of hope, which I guess is just like, you know, be super negative and hope that or not hope, but, you know, like talk about the market as if it's this like deep demon that has wronged you and that you want it to crash and burn, which seems to be like kind of one of those other things.

[00:09:59] I think a lot of cynicism is bred out of that, like that disenfranchised feeling that people feel when they're excluded from the housing market.

[00:10:05] No, I think you're absolutely right because they're sold this dream, right?

[00:10:09] And now they're getting in their top supposedly top earning years.

[00:10:13] You know, they're out of school and, you know, they're hearing stories about their parents buying their first home in their mid to late 20s.

[00:10:21] And realistically, it's not going to happen for them for probably either ever or not until they're 30, 40 or even older.

[00:10:30] Yeah, I know.

[00:10:31] You know, it's a tough situation for a lot of people to be dealing with.

[00:10:35] And again, like if you really, really do believe in property ownership as like, you know, it's a must be for whatever reason, you can have both.

[00:10:44] Like we've talked about and I'll get into it a little bit more when we talk about the real estate focus strategies on how to build a down payment.

[00:10:51] Like how can you use real estate as a wealth building tool without owning your house to save a down payment?

[00:10:56] Because honestly, like that's what I've done.

[00:10:58] That's what like Nick could pretty easily sell a couple of his investment properties or even refi a couple of his investment properties, realize that equity and then go buy a house.

[00:11:07] He chooses not to, but it's I would say the returns are still substantial enough that like you can use it as an investment to build the down payment.

[00:11:14] Most people just don't think about it that way.

[00:11:15] They think, oh, I have to buy the house and then I have to get on the rocket ship.

[00:11:20] And then I, you know, once I've been on the rocket ship for five years, I can take some equity out of the rocket ship, which is my primary residence and go buy an investment property.

[00:11:27] Who's to say you can't do it the other way around?

[00:11:30] No, exactly.

[00:11:31] Exactly. And that rocket ship analogy is pretty good.

[00:11:34] You can you can ask people who bought a house in Florida in 2007, 2008, how that kind of mindset has worked out for them or Vegas, I think was hit pretty hard in the US.

[00:11:46] Yeah, you can even ask somebody who bought Florida real estate in 2011, maybe, because I think they're not doing too well right now either.

[00:11:52] A lot of waterlogged rocket ships in that market for sure.

[00:11:56] Mm hmm. Exactly.

[00:11:58] So, you know, the reason why we're doing this here is because a lot of the time you'll see like kind of common advice I see is just, you know, just put your money in a savings account or GIC while you save for a down payment.

[00:12:11] But I think let's be real here for a lot of people.

[00:12:15] It's just and that's the reason I talked about these two scenarios, just because this will just not cut it.

[00:12:20] You know, they're not going to be able to build a down payment, especially if they want to live in one of those large cities.

[00:12:27] So having a different strategy with FHSA, TFSA, RSP, that you're able to take a bit more risk, but at least you're giving yourself a chance of achieving that.

[00:12:38] And of course, before I say it, this is not investment advice.

[00:12:41] You will be taking additional risk by doing this.

[00:12:44] So by taking additional risk, you increase the chances of losing money.

[00:12:47] And for each scenario, I'm actually giving a bullish, neutral scenario, a bearish and a couple of them I'll give extremely bearish because I want to show the different potential outcomes that could happen.

[00:13:02] And some of them, yes, you achieve the desired down payment.

[00:13:06] But in the bearish or extremely bearish, you actually lose like half of your money.

[00:13:11] So I think that's that's important to remember.

[00:13:14] Even if your time horizon is 10 years, it's not a very long time when it comes to investing.

[00:13:20] So some assets that I will talk about will do very well during very long periods of time, but could struggle even when you're looking at timeframes such as like 10 years.

[00:13:30] And especially if it's less, be careful of taking too much risk, especially if you have money in a registered account.

[00:13:35] For example, if you YOLO, so you only live once type of investment, a super risky stock, let's say a single stock.

[00:13:43] And I've heard of this before in your TFSA and you lose all your money and you've maxed out your contribution.

[00:13:49] Well, that contribution room is just gone forever.

[00:13:52] If owning a home is not realistic, consider renting like you just mentioned and investing the money that you are able to save in a more balanced portfolio, have a longer term outlook.

[00:14:03] You know, at the end of the day, from a financial perspective, I can give you a lot of different arguments that it makes the most sense to rent, especially now as you're kind of starting to see and rents will ebbs and flow depending on, you know, offer and demand, obviously.

[00:14:19] But I think you can make cases where it's sometimes a lot more advantageous to rent and invest the money as well.

[00:14:25] Before I give the examples, anything you want to add, Dan?

[00:14:28] No, I think that, and I'm going to dive into this a little bit in my section, but a big piece of this is understanding that like most people haven't done the math on, it would surprise the average person how little anyone has done the math on anything related to their real estate purchase.

[00:14:48] Honestly, like most, but if you haven't done a real cost benefit analysis on renting versus buying, which, you know, I think if you're going to dive into that a little bit, but especially if you want to be, you know, near center ice in a top five Canadian city, nine times out of 10, you're in a condo.

[00:15:05] Realistically, you're not really renting a house, right?

[00:15:07] Cause you want to be walkable to work.

[00:15:09] You know, your house is almost like a pseudo hotel room for you.

[00:15:12] And so you, you know, you're getting a one or two bedroom condo and you, you know, you're the city is your, your, the rest of your house.

[00:15:19] Your oyster.

[00:15:20] Yes.

[00:15:20] Yeah.

[00:15:20] And, and so, and that's, and for, for young people who want to be, you know, spending more of their time and energy on work than how, like their, their household makes sense.

[00:15:29] It's the thing is condos like from just where they stand right now in the market, Toronto and Vancouver, I can use some, I'll present a very clear example of how to run that cost benefit analysis.

[00:15:39] But like you're, even if you owned the same condo that you would be renting for like $2,500 a month, you actually would not be getting ahead.

[00:15:48] Even, even if you had no ROI on the down, the, the down payment.

[00:15:53] So there's no opportunity costs on the down payment.

[00:15:55] So people really need to, and actually I would encourage people to just type into chat GPT.

[00:16:00] Like I'm looking at either buying a condo at this price or renting the condo at this price.

[00:16:04] Here's what the interest rate is.

[00:16:05] Here's what the condo fees are.

[00:16:06] Here's what the taxes are.

[00:16:10] And give me a cost benefit on that.

[00:16:11] And it will give you a pretty good analysis.

[00:16:14] So, yeah.

[00:16:15] So when the scenarios I'm actually, so I decided what kind of assets to look at.

[00:16:20] And then I did the similar kind of thing.

[00:16:22] I asked chat GPT, I'm like, give me kind of the four outcomes.

[00:16:25] And I thought, you know, that, you know, the returns for the, the, the bullish and not neutral and bearish outcomes were pretty reasonable.

[00:16:33] So I think that's, and they'll do the calculation for you.

[00:16:36] It'll be much easier, but it's amazing how many people kind of forget that they have to pay condo fees.

[00:16:42] If they pay, they live in a condo, pay property taxes, maintenance on a house, like all these things add up that you would not have to pay if you're renting.

[00:16:51] Now for the examples here.

[00:16:53] Now let's go back to the first scenario.

[00:16:55] I was saying you're saving 250 bucks a month towards a down payment.

[00:16:58] Your goal is to purchase a home in the next 10 years.

[00:17:01] And you think you'll need a hundred K for a down payment.

[00:17:03] Well, the first thing I would do here is try to see if you can save a bit more per month, whether it's through additional income or reducing your expenses.

[00:17:11] So let's just say instead of 250, let's say you're able to scrape in an extra $50 a month.

[00:17:17] So you can do 300.

[00:17:18] So if you invest in, in a savings account and getting 4%, that would give you 44,000 at the end of 10 years.

[00:17:25] Now, if you're able to bump that up to $400 a month, you would have 59,000 still well short of your a hundred thousand goal.

[00:17:32] I just wanted to highlight this because remember these numbers, because some of the outcomes that we will get on the portfolios are actually much lower than this.

[00:17:42] So you have to be realized that you are taking additional risk and depending on what the markets do, you know, you could end up with a lot less money than if you put it in a, you know, savings account and 4% or treasury bills that are very short term one to three months, whether it's Canadian or US.

[00:17:58] Yes. And of course you, this is more static for the amount that you're adding, but of course you could be doing, you know, for the first three years, $200 a month, then you get a salary increase.

[00:18:09] You can do 400 among the next three years and then $600 a month, the last four years in that 10 year period.

[00:18:15] Well, you also end up with 59,000 because the increases in money you can save doesn't have a lot of time to compound.

[00:18:23] So make sure you keep that in mind because the sooner you can save and increase your savings rate, the higher the impact will be because of the investment compounding over time.

[00:18:33] The example here that I have for the first portfolio is a more traditional balanced portfolio.

[00:18:39] So, you know, stuff you'll commonly see, not quite the 60-40, so 60% stocks, 40% bonds, but something pretty similar.

[00:18:48] So here I decided to do 50% stocks in an S&P 500 ETF index fund, 40% in cash yielding 4%, but cash could be, you know, short term treasury bills, you know,

[00:19:02] could be U.S. treasury bills, something like that.

[00:19:04] Doesn't have to be in a savings account.

[00:19:06] And 10% in TLT, which is the 20 plus year U.S. treasury ETF.

[00:19:12] I'm not a big fan personally of long dated bonds right now, given the debt situation, but nonetheless, I wanted to run the numbers.

[00:19:20] So the first bullish scenario here or the bullish scenario.

[00:19:23] So the assumptions here are the S&P 500 would get you 12% annual returns, cash, of course, 4%,

[00:19:30] and TLT 6%.

[00:19:33] So the end value you get is 55,000 at the end of 10 years.

[00:19:37] And if you do $400 a month, it's 73,000.

[00:19:42] So you end up clearly in front then if you would just be doing, you know, putting in cash yielding 4%.

[00:19:50] Now the neutral scenario, the S&P 500 is 8% annual return and TLT 3%.

[00:19:57] I won't say the cash because it's always 4%.

[00:19:59] The end value is 49,000 if you do $300 a month and 65,000 if you do $400 a month.

[00:20:07] The bearish scenario, now you're looking at 3% annual returns for the S&P 500 and all the returns are annual and 0% for the TLT.

[00:20:17] You're looking at the end value of $42,000 for $300 a month and 56 for $400 a month.

[00:20:25] So at this point, you know, you're starting to get into, you know, lower than if you had money just in cash.

[00:20:32] So I think it's important to remember there's different outcomes.

[00:20:35] There's infinite numbers of outcome that could happen, you know, almost with a when you're looking at return.

[00:20:42] So keep that in mind.

[00:20:43] And the extreme bearish scenario here is negative 2% annual return for the S&P 500 and negative 2% for TLT.

[00:20:52] You end up with $36,000 for the $300 a month and $49,000 if you do $400 a month.

[00:21:00] So I wanted to mention this and this is a more kind of balanced traditional portfolio.

[00:21:04] And you can already see that not all outcomes are good and even the best outcome, you actually fall short of your $100,000 goal.

[00:21:14] Any comments on this one, Dan?

[00:21:16] I know it's not your forte, but still.

[00:21:18] Yeah, I mean, it's definitely not my forte.

[00:21:21] I'm not like, you know, I always found it, you know, we talked about it with the registered accounts and stuff like that.

[00:21:26] But it took me, I mean, investing for me was very much just a, it was a painful or expensive education on just using indexes that I just couldn't, I wasn't good at investing in anything other than that, right?

[00:21:39] So I could never beat the market.

[00:21:41] But yeah, I think like your outcomes, like the easiest way to control some of those outcome scenarios is again, just like reweighting your basket to be a little bit more risk or take a little bit less risk, I guess.

[00:21:54] Right.

[00:21:54] And just, I think people need to assess, okay, what, which, you know, like the KYCs that you do when you fill out like a quest trade or like whenever you're on one of those websites, it's so good to just like actually, people need to actually think about this stuff.

[00:22:08] You know what I mean?

[00:22:08] Mm-hmm.

[00:22:09] It's like, oh, am I, like what would happen?

[00:22:11] Like, cause they're literally like, oh, like assume that you, you know, your, your stocks just draw down like 50%.

[00:22:17] What would you do?

[00:22:17] Buy more?

[00:22:18] It's like, well, would you actually like, you know, cause most people are hitting the sell button as soon as they see the red.

[00:22:23] Yeah.

[00:22:23] And it's easier said than done, right?

[00:22:25] One till you actually live it.

[00:22:27] And that's always something I remind to people.

[00:22:29] It's like, okay, just keep that in mind.

[00:22:31] And of course you could decide to choose individual stocks.

[00:22:34] I tried to keep it as simple as possible because, you know, ETFs are pretty easy to access.

[00:22:40] But now I'll go into kind of slightly riskier portfolio.

[00:22:44] You know, I'm going to add some Bitcoin in there for the last two portfolio.

[00:22:47] This one I consider risky and the last one, very risky.

[00:22:51] So keep that in mind because there is the potential for losses is greater.

[00:22:55] So this one is 60% stocks in the S&P 500, 20% in cash, yielding 4% again, 10% in gold, 10% in Bitcoin.

[00:23:04] Now for gold and Bitcoin, you can very easily use ETF.

[00:23:09] I believe BMO has a gold ETF, ZGLD, if I remember correctly.

[00:23:13] Bitcoin, I would always recommend the US listed ETFs because they're much lower in fees,

[00:23:18] but you will have to convert Canadian dollars to US dollars.

[00:23:21] Now the bullish scenario here is for the S&P 500, you get 10% annual returns.

[00:23:27] And I've noticed here that Chad GPT gave me slightly different bullish scenarios, but that's okay.

[00:23:32] It's just to illustrate it.

[00:23:34] Gold ETF, 6%, Bitcoin 20%.

[00:23:37] So the end value is 60,000 and 80,000 if you do $400 a month, 60 if you do $300 a month.

[00:23:46] Now the neutral scenario here is 6% annual return, gold 3%, Bitcoin 7%.

[00:23:54] The end value is 48,000 for $300 a month and 63,000 if you do $400 a month.

[00:24:01] So the neutral scenario still gets you slightly more than if you just did cash.

[00:24:06] Now the bearish scenario, the assumption here, negative 2% the S&P 500, gold ETF 1%, Bitcoin negative 15%.

[00:24:15] The end value is 34,000 and for $300 a month and 45 for $400 a month.

[00:24:22] So you're starting to see here that yes, when you start getting into the bearish scenarios,

[00:24:27] the outcomes are not great.

[00:24:30] But again, if you're looking at the bullish scenario, you're getting closer to your goals.

[00:24:35] So it really has to be a question you have to ask yourself because at the end of the day,

[00:24:40] you know, people can recommend putting all the money in a savings account or GICs.

[00:24:44] If your situation is as such that you cannot save more money than that and for whatever reason,

[00:24:51] you know, you have to stay in the current location.

[00:24:53] The other options are not open to you.

[00:24:55] You can't really cut your costs for a month.

[00:24:58] Well, if home ownership is that important for you, I'm not saying it's the best financial decision,

[00:25:03] but if it's that important to you, then at the end of the day, you will have to take more risk.

[00:25:08] That's the simple thing if you want to have a shot at attaining that.

[00:25:14] Now, the last one is higher risk.

[00:25:15] So it's 80% in the QQQ ETF.

[00:25:19] So this is the power share.

[00:25:20] It follows the NASDAQ.

[00:25:21] 20% in Bitcoin.

[00:25:23] This will be very volatile.

[00:25:25] And so just keep that in mind.

[00:25:28] The bullish scenario, the QQQ is 12% annual return, Bitcoin 20%.

[00:25:33] The end value is $74,000 if you do $300 a month.

[00:25:38] And 99k, let's just say $100 for the fun of it, if you're doing $400 a month.

[00:25:43] So you essentially can achieve your goal if you're doing $400 a month.

[00:25:47] The neutral scenario is 7% annual returns for QQQ, 7% Bitcoin.

[00:25:52] So if you do $300 a month, you end up with $52,000 and $400 a month, $69,000.

[00:26:00] The bearish scenario is QQQ negative returns of 3%.

[00:26:04] Bitcoin negative returns of 15%.

[00:26:07] The end value is $28,000 for $300 a month and $38,000 for $400 a month.

[00:26:13] So now you're looking at pretty significant losses compared to if you had it in cash.

[00:26:18] In the extremely bearish scenario, QQQ is negative 6%, Bitcoin negative 30%.

[00:26:25] And the end value is $23,000 if you do $300 a month and $31,000 if you do $400 a month.

[00:26:33] So you're literally looking at 50% loss pretty close to it in the extremely bearish scenario.

[00:26:40] And obviously, you'll have to also weigh the probability of each scenario happening.

[00:26:46] You know, it could get worse than the extremely bearish scenario as well.

[00:26:50] So keep that in mind.

[00:26:51] And I want to make it very clear for people.

[00:26:53] This is not investment advice.

[00:26:55] I know I said it before.

[00:26:56] But I want to show people that yes, having, you know, a really bad outcome when you're taking more risk is definitely possible.

[00:27:04] But again, the reality is that housing is not very affordable in Canada.

[00:27:09] And for some, taking more risk will likely be the only way that they can achieve home ownership.

[00:27:17] I do have some key takeaways there.

[00:27:19] Anything you wanted to add before I say that?

[00:27:22] And then we move on to your section.

[00:27:24] No, I just think, you know, it is one of those challenges.

[00:27:28] And I think one of the ways that we see people being able to create or like to kind of reduce that risk while still getting outsized returns is almost like getting an investment that has a little bit of a job element to it, right?

[00:27:40] Like real estate can very much be a gold in the handcuffs a little bit.

[00:27:42] Like it can become a very lucrative job.

[00:27:44] You'll get people who, you know, are flipping properties or they're doing Airbnbs or something like that.

[00:27:51] And there's a, you know, there's some work required with that.

[00:27:54] And so the work you put in can kind of reduce the risk while still getting those higher returns.

[00:27:58] But it ends up like being a side hustle.

[00:28:00] And I think a lot of people forget that part.

[00:28:02] So you got to consider the hours that you're putting into it.

[00:28:04] Even if you're managing your own portfolio, you got to consider the hours you're putting into it as well.

[00:28:08] Yeah, no, exactly.

[00:28:10] That's it.

[00:28:10] And, you know, I kept it quite simple.

[00:28:13] These are kind of portfolios that I wouldn't say set it and forget it, but they shouldn't require too much management.

[00:28:19] Clearly, you can own individual companies.

[00:28:22] There's other types of assets you can own.

[00:28:24] You can, you know, put in some REITs in there.

[00:28:26] I know you'll be talking about that as well.

[00:28:28] But, you know, there is just some, you know, just for inspiration, I would say, for people.

[00:28:34] And clearly, you know, have to do your own due diligence.

[00:28:36] If you're not even comfortable with that, maybe consider working with a professional investment, you know, advisor.

[00:28:43] That could be it.

[00:28:45] Although sometimes their fees will probably be really high if you're just looking at small investments like this.

[00:28:50] So keep that in mind.

[00:28:51] Now, the key takeaway is increasing your monthly income contribution will have a large impact on the outcome.

[00:28:57] We actually did a recent episode that had like a lot of traction on how you can make small regular contribution that can make like a big difference.

[00:29:06] So just being able to increase, I mean, you saw it with the numbers, right?

[00:29:10] Even in the less risky portfolio, the more balanced one, the difference that just an extra $100 a month can do, you know, in the neutral scenario even, right?

[00:29:21] Even when you're not looking at amazing returns, that extra $100 a month can make a pretty big difference.

[00:29:27] So keep that in mind instead of just thinking, OK, I'll try to achieve 25, 30 percent annual returns.

[00:29:35] Like that's not realistic.

[00:29:36] Like you will the chances that you achieve that are extremely low.

[00:29:42] And when it comes to any kind of returns, whether it's this, even real estate, right, Dan?

[00:29:47] You have to think in probabilities and the most probable outcome.

[00:29:51] So when you purchase a property, you know, you have to think of the different outcomes and what probability you place.

[00:29:58] I don't like my brain thinks like that.

[00:30:00] But a lot of people oftentimes either, you know, they tend to disregard any risk.

[00:30:05] So and they just think about the positive outcome.

[00:30:08] But I want to reinforce that higher risk means that, yes, you have higher chance of getting closer to your goal, but you also have a higher chance to take significant losses.

[00:30:16] The more aggressive you get.

[00:30:18] So keep that in mind.

[00:30:20] These would be average returns in these types of scenarios.

[00:30:23] But the reality is the market, you know, goes up and down.

[00:30:28] So, you know, these annual returns will not be the same.

[00:30:33] So I can take, you know, that go back to the more balanced portfolio where it said the bullish outcome is 12 percent annual return.

[00:30:42] And then for the S&P 500 and 6 percent for the bonds.

[00:30:46] Well, it's very possible that a year you can get 15 percent and returns for the S&P 500.

[00:30:52] And the next year you get negative 15.

[00:30:54] So you have to keep in mind like it goes up and down.

[00:30:57] And depending on the timing of when you'll you'll need the money, you know, it may get a little tricky and you may not get like the best outcome, which brings me to my fourth takeaway here.

[00:31:08] It is the closer you get to your goal or needing the money, the more you should start thinking about de-risking your portfolio and putting more into cash or cash equivalents.

[00:31:19] I mentioned a lot short term treasury bills, one to three months.

[00:31:22] There's ETFs.

[00:31:23] The ones I use, it's U-bill for U.S. dollars.

[00:31:27] It's listed in Canada.

[00:31:28] So it's TFSA and registered account friendly or C-bill again for same thing, but for Canadian treasury bills.

[00:31:35] And again, it doesn't have to be an all or nothing.

[00:31:38] That's why I wanted to show some of the different approaches.

[00:31:41] You could keep 80 percent in cash yielding for percent and just have 20 percent into an S&P 500 index fund, for example.

[00:31:50] So you like I think a lot of time you see that with investors as they get kind of into an all or nothing, you know, approach, whether it's, you know, gold bugs.

[00:32:01] They just put everything in gold or, you know, people think market's going to crash.

[00:32:05] I'm going to put everything in cash.

[00:32:07] You know, just being able to have a balanced approach.

[00:32:11] I think it's really important and just kind of forget the all or nothing thing.

[00:32:15] If it's 90 percent in cash and 10 percent in the S&P 500 because you want a little boost on those returns just to, you know, that's the little nudge that you think you need to achieve the down payment.

[00:32:26] Then, you know, maybe that's something you can consider as well.

[00:32:29] Yeah, 100 percent.

[00:32:30] Should I jump over to, you know, if somebody wants to get exposure to real estate while saving for their real estate?

[00:32:36] Yeah.

[00:32:37] Yeah.

[00:32:37] Let's go for it.

[00:32:38] You have quite a bit.

[00:32:39] So I will have to zoom.

[00:32:40] Yeah, I got I can zoom through it for sure.

[00:32:42] So I got a lot of ground to cover here.

[00:32:43] So so basically, like if you know, I learned pretty early that I was very good at losing money when it came to stocks and stuff like that.

[00:32:49] And I would imagine most of your listeners won't be in that that category because they listen to you.

[00:32:55] But I was good at investing in real estate.

[00:32:57] I'd seem to do a decent job at that.

[00:32:59] I think a lot of Canadians feel that way, especially if, you know, the the their goal outcome here for them is to to save for a down payment.

[00:33:07] They're probably in some way, shape or form bullish on real estate.

[00:33:10] Right.

[00:33:10] Right.

[00:33:10] So the easiest way for people to get access to real estate while saving for real estate is there's a list.

[00:33:17] There's a handful of different ways you can do it.

[00:33:18] I'll give you a summary of the list and we'll go from there.

[00:33:21] So house hacking, flipping properties, rent to own or co-ownership, REITs, which you mentioned, short term rental and short term rental arbitrage.

[00:33:30] None of these are recommendations, by the way.

[00:33:31] I'm just kind of giving you all the info because some of them I don't like at all.

[00:33:34] The BRRRR strategy, partnership with other investors.

[00:33:37] So like crowdfunding, exempt markets, et cetera, and private lending as well.

[00:33:42] And so I'll start off with the with the house hacking.

[00:33:46] House hacking would be again, this is going to be a challenge if you don't have a substantial down payment.

[00:33:51] Saved up.

[00:33:52] But, you know, maybe if you're in hybrid work or in a decentralized workplace or you work from home and you could go live in another city that has cheaper housing, you know, like the St. John's of the world or, you know, the prairies.

[00:34:04] If you could buy a house, you can purchase a multi-unit property like a duplex or a triplex and you live in one unit and rent out the other.

[00:34:10] That would be house hacking.

[00:34:10] Right.

[00:34:11] So you kind of get both worlds.

[00:34:13] The challenge with this one is that it requires a down payment.

[00:34:16] So if you're using it to save for your down payment, it might be a bit difficult.

[00:34:19] It would lower your personal housing costs while allowing you to build equity and you're getting some of that rental income while capitalizing on the leverage that you get from real estate.

[00:34:27] The next one would be flipping properties.

[00:34:29] I consider this a job.

[00:34:30] Some people consider this an investment strategy.

[00:34:32] I consider this like a side hustle or a job.

[00:34:34] It's very time intensive, but basically you buy an undervalued property, you renovate it, you sell it at a higher price and you profit from the sale, you know, buy low, pump some money in, sell high.

[00:34:47] You really need to understand the market.

[00:34:49] You need to know about renovations.

[00:34:50] If you're like a skilled trades person or somebody who can do the work and you can find the deals for cheap or you have an investor, you can buy super distressed properties that no banks would lend on.

[00:35:00] And you just ask the owner to give you a VTB mortgage or something.

[00:35:03] Yeah, you can do well doing this, but in most other cases, it's pretty tough.

[00:35:06] It's very high risk.

[00:35:07] And again, it's a job.

[00:35:08] The next one is buying in a rent to own arrangement.

[00:35:12] And actually Nick and I just did an episode on this.

[00:35:14] We recorded it.

[00:35:15] It's in the hopper.

[00:35:16] Kind of one of those evergreen episodes that'll come out whenever, but rent to owns tough.

[00:35:20] It's hard to win with that strategy because you're basically overpaying your rent, which rent's already pretty inflated in this scenario, to the owner of the property and kind of gradually saving a down payment through them.

[00:35:31] So you're just getting a savings vehicle on top of rent.

[00:35:33] It's tough to win with that one from my perspective.

[00:35:35] I think most people can actually outperform the return that you get that's embedded within the rent to own agreement.

[00:35:41] So I usually would say stay away from that one.

[00:35:43] But co-ownership, like there's a lot of new fintech startups, let's call them.

[00:35:48] Lotly, Key, Arbro, and Fractinum would be some names of ones that I would say people could Google.

[00:35:55] But basically with these, they will match your down payment or even give you like 75% of your down payment.

[00:36:05] So if you only have 2.5% to put down, they'll actually match you and they benefit in the upside.

[00:36:12] But you make all the payments and all of that.

[00:36:14] I thought you had to sell your soul away to be able to get that.

[00:36:17] That too, yeah.

[00:36:18] There's some kidneys involved and stuff like that.

[00:36:20] No, I don't really like some of them.

[00:36:23] I actually like I talk to some of these groups and I like them, but they do get a bad rap.

[00:36:28] Like I know some other people in the industry have criticized them quite a bit.

[00:36:30] But I think that they're, look, like I think that the problem is the Canadian cultural obsession we have with housing.

[00:36:39] That's like homeownership by any means necessary.

[00:36:41] All they did from my perspective was provide the any means necessary.

[00:36:45] But the people who have an issue with it don't acknowledge that the problem isn't the any means necessary.

[00:36:51] It's the cultural obsession from my perspective.

[00:36:55] The next would be REITs, which I feel like you've talked a lot about on the show.

[00:36:58] But if you want exposure to real estate and you don't have a down payment, you can invest in REITs.

[00:37:04] I feel like most Canadian REITs are trading below NAV right now.

[00:37:07] They're, you know, they're like a pretty cheap way to buy, actually buy like real estate based on their asset value.

[00:37:14] So, you know, if you get real estate and you get the value in underwriting, like most of those I would actually advise people to look at.

[00:37:21] That's kind of one of my favorite ones on the list, to be honest.

[00:37:24] And it also encourages you to underwrite like and think about real estate more from an institutional perspective,

[00:37:28] which can really benefit you later when you're getting into buying your primary or investing in real estate.

[00:37:34] Otherwise, most people think about real estate too much of it as like a speculative asset rather than a, you know, than a, than a, the proper.

[00:37:43] Cashflow generating one.

[00:37:43] Yeah.

[00:37:44] Yeah.

[00:37:44] Or like an institutional, like, yeah, just like you say, a cashflow.

[00:37:48] The next one would be short-term rental properties.

[00:37:50] Very similar to flipping from my perspective.

[00:37:52] You'll see a lot of people doing like Airbnb arbitrage.

[00:37:54] They call it where like they'll go rent a place and then like, like on a long-term rental and then they'll sublet it to Airbnbs.

[00:38:01] That's a job really like it's a side hustle the same way as, as flipping.

[00:38:05] You can make a lot of money, but it is like, it's, it's a lucrative job.

[00:38:09] Let's call it.

[00:38:10] Burr strategy.

[00:38:11] Very similar to like house hacking.

[00:38:13] You could buy a property and then you put, put some money into it.

[00:38:17] It's kind of a blend between let's call it flipping and maybe house hacking.

[00:38:20] You rehab it, you rent it out, refinance and repeat.

[00:38:22] It's pretty hard to actually do this in Canada, to be honest.

[00:38:25] Like the spreads on the value you can create from renovation doesn't actually allow people to scale.

[00:38:30] I guess you'd have to be like able to do most of the rentals yourself for it to start making sense.

[00:38:36] Yeah.

[00:38:37] Yeah.

[00:38:37] And so like when, when the feds came out with this policy about giving people those 90% mortgages to refi out if they've added units to their house, I came up with this thing called the first time home burr.

[00:38:47] Which was like, which honestly, like it's, that's kind of what they're encouraging people to do.

[00:38:52] So that might actually be a good strategy for people where it's like, Hey, buy, you know, whatever a house with an insured mortgage.

[00:38:58] And then over time, like over the course of your first mortgage term, add a unit to it and then refi out and use the rental income.

[00:39:07] This is what I did for my first two properties, right?

[00:39:09] I bought a house.

[00:39:10] I lived in one of the units.

[00:39:11] I rented out another unit and I lived at the unit I was living in.

[00:39:15] I was turning it into an apartment as I lived there.

[00:39:18] I was in university for the first one and my second one, I was young.

[00:39:20] So I didn't like, I could live with that kind of way of living, but that, so that worked well for me.

[00:39:25] Living in renovations, it's not, uh, you know, not for everyone.

[00:39:30] Just know what you're getting into.

[00:39:31] I've done it once and it's, uh, especially if you have kids or something like, yeah, I wouldn't do it to you with kids.

[00:39:37] Yeah.

[00:39:37] But, uh, well, actually I say that, but I'm about to actually renovate my house, but, but, uh, it's just one, one room in the house.

[00:39:43] So we'll, and, and it's not me doing it.

[00:39:45] It's a contractor.

[00:39:46] So, okay.

[00:39:47] I thought it was, uh, I thought it was your spouse doing it, but I guess.

[00:39:51] Yeah.

[00:39:52] Maybe next time she'll do the demo work actually.

[00:39:55] She'll do it.

[00:39:55] Okay.

[00:39:56] The, uh, the next piece, uh, would be partnership with other investors.

[00:40:00] So like, this would be like your GPLP structure.

[00:40:03] So general partner, limited partner crowdfunding would be another good example.

[00:40:06] So like Canadian platforms, I think Addy is like the only one that comes to mind, um, that has like, but they, these groups, um, they work in like the exempt markets, they call them.

[00:40:15] So like crowdfunding uses a Canadian crowdfunding exemption, but then there's also like prospectus exemptions.

[00:40:20] And then there's, you know, like larger ones where you can actually do it through your like RRSP and stuff like that.

[00:40:25] Like Graybrook, actually Graybrook, somebody who we have a guest on the show a lot.

[00:40:30] And these are lower, uh, entry costs.

[00:40:32] They allow you to use registered funds in a lot of cases, not in the crowdfunding one, but I think in like some of your EMD, like exempt market dealer, OM exemption stuff.

[00:40:40] But, uh, you, you know, your capital's out of your hands.

[00:40:44] And honestly, the ones where you're going to get good returns, they're long, they're typically long, like lockout periods, let's call them.

[00:40:49] So you end up like with your capital stuck for like five to seven years, which could kind of be prohibitive if you're planning to use that capital at an undefined point when you find a house that you want to buy.

[00:40:57] Yeah. The last one I'll do here is private lending. Basically you're lending your money out and typically secured against real estate.

[00:41:04] So that's kind of the, how to, how it's a real estate strategy, but basically, you know, somebody, uh, you get through a broker or a lawyer or through the grapevine.

[00:41:14] You hear of somebody who needs 25 grand and you give them the 25 grand and you say, I want, I'm going to, I'm going to register a charge on your house and I'm going to charge you 12% per year, 12 plus 2% or something like that.

[00:41:26] But that's kind of how private lending works. Um, it's obviously backed by the house. So you need to under, be able to underwrite the value of the property to make sure that you're in a safe, uh, loan to value position.

[00:41:39] The last thing I would add, I think before we wrap up here is basically just like, I think people should, should really consider renting in the desired area that they want to be in while they're saving for a down payment.

[00:41:51] And whether it's, you know, especially like if you're in a city and you want to be close to the core, like if you live in urban life and you're living in a condo, it's, I mean, like, we'll just, I'll use a scenario here.

[00:42:02] You can rent a condo in Toronto or Vancouver for probably 2,500 bucks a month, Ottawa and Montreal and, uh, and Calgary, pretty similar.

[00:42:12] The condo, that same condo would cost you probably 600 grand to buy that, you know, assuming you'd be using a four and a half percent interest rate today and 25 year AM 20% down.

[00:42:24] So 120 K. So we're going to calculate an opportunity cost on that capital as well.

[00:42:27] Uh, condo fees would be about 500 bucks, although they're starting to creep up.

[00:42:31] Um, honestly, just inflationary with maintenance right now, property taxes, 2000 a year, get that would probably be in a Toronto and Vancouver, which have the lowest property taxes in the country.

[00:42:41] I was going to say that sounds pretty low, but it sounds low, but yeah, Toronto and Vancouver is like, yeah, like four grand would be like a nice house in Toronto.

[00:42:49] Right.

[00:42:49] The appreciation, I just assumed 3% per year, which is average historical growth.

[00:42:54] And the, and I assumed a 5%, like a super, so basically a GIC on, um, on investments or like, I guess GICs are lower now, but a GIC two years ago on your investments.

[00:43:05] So your monthly costs of buying would be your, your mortgage amounts, 40, uh, 480,000.

[00:43:13] So your mortgage payment, uh, on a 25 year AM four and a half percent interest rate is 26, 2600 bucks a month.

[00:43:19] 20, just, just shy of 2,700 bucks a month.

[00:43:21] Again, add on those condo fees, 500 bucks, add on property taxes, which is $170 a month ish.

[00:43:28] Total cost to own is about 3,400 a month.

[00:43:31] The, so your annual cost of buying is about 40 grand.

[00:43:34] The annual cost of renting would be about 30,000, 2,500 times 12.

[00:43:39] The opportunity costs on that down payment.

[00:43:42] If you rented the $120,000 down payment could be invested.

[00:43:45] So if, and this is where it kind of can be a deciding factor.

[00:43:49] If you make a 5% return, that would yield 6% per year.

[00:43:52] Most people probably who are listening to your advice can make more than 5%, I would say.

[00:43:56] So, you know, you could double that potentially.

[00:43:58] I mean, S and P historic S and P is over 10%, right?

[00:44:01] So.

[00:44:01] I think it's a good, like it's a conservative estimate.

[00:44:04] Yeah.

[00:44:04] Like that's what I would typically.

[00:44:06] Yeah.

[00:44:06] Illustration purposes.

[00:44:08] I think that's good.

[00:44:08] Yeah.

[00:44:09] And so you would, you would also account for principal pay down.

[00:44:13] So your mortgage payments also account for, let's say $600 per month.

[00:44:17] Cause again, the amortization schedule means at the beginning of your mortgage,

[00:44:21] you pay a lot more interest and a lot less principal because you owe more money.

[00:44:24] So this is why real estate really benefits from being owned longer.

[00:44:27] The longer you own it, the faster you pay it down, which is a lot of people don't know

[00:44:30] that and with a 3% appreciation rate, you'd go up 18 K per year in appreciation,

[00:44:37] which is pretty cool when you account for the leverage.

[00:44:39] Like that's a pretty sweet return, honestly, in the grand scheme of things.

[00:44:42] So renting net costs of renting, basically a $30,000 rent costs less that six grand that

[00:44:49] you could earn on the down payment is 24 K a year.

[00:44:51] Buying the total cost of owning was 40 K plus the equity.

[00:44:55] So you'd pay down 7,200 in principle per, per year.

[00:44:58] And the appreciation, which is really the difference maker in this example is 18 grand.

[00:45:03] So your net cost of buying is actually lower at 14,000 in this example.

[00:45:08] So, but as soon as you start to move those levers of, oh, I can make 10% or, oh, the property

[00:45:14] is going down year over year, which it is for condos right now in the, in those two markets

[00:45:18] that, you know, that where this example would exist.

[00:45:21] Now, all of a sudden you've got a market where it makes more sense to rent.

[00:45:24] And also accounting for the fact that rent control exists, um, your rent, like, you know, if you

[00:45:30] lock in a property at today's rents and you're not, you're not fearful of that inflation hurting

[00:45:36] you over time.

[00:45:37] And so, again, this is where I would like know how much money you can conservatively make

[00:45:42] or you're capable of making hopefully over the last couple of years and run that discount

[00:45:46] rate scenario, run that cost benefit analysis.

[00:45:48] If you can make 10% and, and the real estate market isn't giving you the 18% capital appreciation,

[00:45:54] then it probably makes more sense for you to rent than buy.

[00:45:57] If you can't, if you can't make more than that, then it might make more sense for you

[00:46:01] to buy than rent.

[00:46:02] Cause you, and this is again, why most people like real estate, they're not good investors.

[00:46:07] Like that's why I like it.

[00:46:08] You know what I mean?

[00:46:09] The average Canadian probably can't beat that return.

[00:46:12] Yeah.

[00:46:12] Yeah.

[00:46:13] Yeah.

[00:46:13] And I mean, I think at the end of the day, right, some people may end up thinking that

[00:46:19] it's best to still buy because, you know, there are some kind of emotional aspects to

[00:46:25] it, even if it's less economical.

[00:46:28] Let's say, you know, after the calculation, you're like, you know what?

[00:46:31] Renting is actually cheaper when all of this is calculated and factor then.

[00:46:35] And I think, you know, we've been so programmed of about home ownership that I think a lot of

[00:46:40] people will just end up disregarding that and just the emotional desire to own a home.

[00:46:46] Right.

[00:46:47] So I think from a financial perspective, I totally agree in practice.

[00:46:52] I've heard so many people, so many realtors, unfortunately, that they're drinking their

[00:46:57] own Kool-Aid, I would say that don't fully understand that, that think, you know, you know,

[00:47:02] the, the, the advantages of owning a home that are non-monetary, they'll still qualify those

[00:47:10] for whatever reason as monetary.

[00:47:12] I've seen that happen before.

[00:47:13] So I've seen it on flyers.

[00:47:16] Yeah, for sure.

[00:47:17] I think a lot, yeah, I think a lot of people, there's a lot of components that people don't

[00:47:22] really understand about real estate.

[00:47:24] Like, and when, like the condo fees, like that maintenance expense that I mentioned is pretty

[00:47:28] fixed.

[00:47:28] But like, when you get into start, start getting into detached ownership, especially what most

[00:47:32] young Canadians and first-time buyers are reserved to owning, you have a lot of deferred

[00:47:36] maintenance.

[00:47:36] Like in a lot of cases, we're buying old houses that we have to do, like fix up and

[00:47:42] mow lawns and make repairs and whatever.

[00:47:45] Right.

[00:47:45] And so a lot of people don't consider those costs, like go get a home inspection.

[00:47:49] And then all of the things that the home inspector says, like, oh, you're going to have to redo

[00:47:53] the roof in 10 years.

[00:47:54] It's like, did you put that into your financial model that you have to spend 10K in 10 years

[00:47:58] to redo the roof in this house?

[00:47:59] No, probably not.

[00:48:00] Right.

[00:48:01] Well, maybe you should do that.

[00:48:03] Yeah.

[00:48:03] One for homes, right?

[00:48:05] One to 2% typically of the home's value will go towards maintenance.

[00:48:09] And again, it's same thing as returns, right?

[00:48:12] And why it will likely not be one to 2% every year, but one year, maybe 5%, the next one

[00:48:17] flat.

[00:48:18] So just keep that in mind.

[00:48:19] Yeah.

[00:48:20] A hundred percent.

[00:48:21] Okay.

[00:48:22] So while Dan, thank you for coming on the episode.

[00:48:25] I know we're running a little bit long and I think you're going to be on daddy duty soon.

[00:48:30] So I don't want to keep you any longer than you have to on this show, but I think it was

[00:48:36] great doing this episode.

[00:48:37] I'm sure we'll do it again at some point in the future.

[00:48:40] Again, I'll just remind people, if you just listened to this episode, go into the show

[00:48:44] notes, you'll be able to see a link to the first part of this episode where we go over

[00:48:49] the different type of accounts.

[00:48:51] And then you'll be able to make a bit more sense of it with, you know, different kind

[00:48:55] of investment strategy.

[00:48:56] But Dan, it was great to have you on.

[00:48:59] Please check out the Canadian real estate investor podcast.

[00:49:02] Dan and Nick do, sorry, Dan and the Batman do a fantastic job.

[00:49:07] They, yeah, they, the episodes are always great.

[00:49:10] I sometimes miss one, but I try not to.

[00:49:12] I always find that I learned something about real estate that I didn't know.

[00:49:16] So thanks for listening and we'll see you next week.