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My House Was A Lousy Investment (Or Was It?)

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As we get closer to moving into our new home (and selling our existing one) I decided to look back on the financial return of our home purchase. I wish I hadn’t. On first glance, I think my house was a lousy investment.

We haven’t put our house on the market yet, but we will soon and I expect it to sell for somewhere between $500,000 and $549,000 (the range of outcomes has widened, especially to the downside, as the housing market slows down).

If it sells for $524,000, we’ll make $100,000 over the $424,000 that we initially paid for the house back in 2011. That sounds okay, but it represents just a 1.94% compound annual growth rate. Oof.

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But it gets even worse from there.

Phantom Costs of Home Ownership

The year after we bought our home we spent $7,500 on landscaping the front and back yard, and putting up a fence. The following year, we spent $32,500 to renovate the unfinished basement.

That already puts us at $464,000 and I haven’t included phantom (unrecoverable) costs such as property taxes, insurance, and maintenance.

Thankfully, the brand new house didn’t cost much in terms of ongoing maintenance over the last 11 years. I’m going to be generously low and put this at $1,000 per year for a total of $11,000.

We paid an average of $4,000 per year in property taxes ($44,000 total), and an average of $1,600 per year for insurance ($17,600). That’s another $61,600 in total unrecoverable costs that we paid as homeowners.

We made mortgage payments, on average, of $1,600 per month. Over 11 years that adds up to roughly $211,200. I’d estimate $50,000 of that went to interest costs and $161,200 towards the principal.

Finally, there’s also the opportunity cost of capital – the $88,000 down payment we put towards the house purchase back in 2011.

What If We Rented and Invested the Difference?

If we had invested that amount in a globally diversified portfolio of stocks and earned 8% per year (not unrealistic, considering the S&P 500 gained 14.4% from 2011 to 2021) that $88,000 would turn into roughly $190,000. Call it a $100,000 opportunity cost.

Let’s say we rented a house for the last 11 years, paying the equivalent of our total mortgage payment each month in rent. We invested our initial $88,000 lump sum, plus another $550 per month that we saved from not having to pay property taxes, insurance, and maintenance. We’d end up with about $295,000 by the end of 2021.

Also, don’t forget the extra $40,000 we spent on renovations and landscaping. Let’s say we just kept that in cash under our mattress. We’d have $335,000 in savings and investments today had we rented and invested / saved the difference.

Instead, we put that $88,000 towards a house. We put an additional $40,000 into the house to finish the basement and landscape the yards. And, we paid another $72,600 in phantom or unrecoverable costs over the past 11 years, plus another $50,000 in interest costs.

Not So Fast

To counter that, the majority of our mortgage payments went towards paying down the loan principal and so we have that $161,200, plus our initial downpayment of $88,000, built up in home equity. We can’t forget about that so-called forced savings.

Finally, we should include another expense – $20,000 in realtor fees after the sale of our house.

By my count, if we sell the house for $524,000, pay the realtor fees of $20,000, and pay off the remaining mortgage of $170,000, we’ll end up with about $334,000.

In the rent-and-invest-the-difference scenario, we’d end up with about $335,000.

Related: Is Renting Throwing Money Away?

In other words, in both the buying and renting scenarios our starting position was $88,000 in 2011, plus another $40,000 of capital invested between 2012 and 2013. Our ending position in 2022 will be around $335,000 either way.

I’d say it’s pretty clear the difference is negligible between the two outcomes, and most likely leans towards buying for some of the intangible benefits of home ownership.

Final Thoughts

Home ownership has been a clear winner for many Canadians over the past decade or longer, particularly for those living in BC and Ontario. For some, it has been like winning the real estate lottery.

But for homeowners living in Alberta, Saskatchewan, or in Atlantic Canada, the math isn’t always as favourable. Home prices can stagnate for many years, and phantom costs eat into your returns over time.

Was my house a lousy investment? After a closer look at the numbers it hasn’t been that bad.

More importantly, I don’t actually consider my primary residence to be an investment. It’s a lifestyle decision, more than anything.

We didn’t win the real estate lottery, but we spent 11 years living in a house we loved and we’re leaving it richer in both wealth and memories. That’s good enough for me.

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Record investment in MB highways in store for 2023 – DiscoverWestman.com

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MLA for Turtle Mountain, Doyle Piwniuk, says he’s looking forward the New Year as one full of accomplishments.

“I’m very optimistic, we have a very big year going forward provincially,” he explains.  “We’re looking at economic development, reconstructing of more highways, like Hwy 23 in the region, and we have more highways to fix.  Going forward in 2023 there will be a record investment in our highways.”

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“It’s also going to be a good year for the Turtle Mountains area too because of the opportunities at the International Peace Garden and the economic development in the different communities. I believe we are going to have a very bright 2023,” adds Piwniuk.

“On behalf of my family to your family, I want to wish you a very merry Christmas and a happy New Year,” he shares.  “And, any time you want to get ahold of me please contact info@dolyepiwniuk.ca or you can call our number at 204-552-0130.”

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Choose Your Investment Guru Wisely – Forbes

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If you want to learn how to play tennis, it makes more sense to take the Masterclass from Serena Williams than to watch a random infomercial or a video from your high school coach. If you want to learn about investing you should also seek out the best.

Warren Buffett is verifiably the best investor of all time, with an audited track record going back several decades. Why, then, do so many would-be investors choose other role models, who all too often turn out to be hucksters and hacks—or just plain misguided?

I’ve asked the question many times. I’ve posed it to my NYU finance students each semester for over 20 years. Still, there’s no satisfying answer. I could hardly believe it when Bloomberg reported that Caroline Ellison of Alameda, FTX, and crypto infamy (and the former girlfriend of Sam Bankman-Fried) had supposedly learned investment strategies from Edwin Lefèvre’s Reminiscences of a Stock Operator, a roman à clef based on the life of Jesse Livermore, the stock trader who made a fortune shorting stocks before the 1906 San Francisco earthquake.

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I’ve heard other young stock enthusiasts cite the book before. In 2021, Business Insider published a profile of 20 ambitious teen traders. One even mentioned Reminiscences as a favorite book. It’s one thing to read this book as entertainment. It’s another thing entirely to read it as an instruction manual. That’s because the book was published in 1923—long before Jesse Livermore’s last act.

At the age of 14, young Livermore had his first job posting stock quotes at the Boston branch of Paine Webber. His colorful life makes for great artistic inspiration and Lefèvre was probably unable to resist the allure. Livermore made and lost his fortune many times, not a sign of a good investor but rather the clear profile of a gambler and speculator. Livermore was a flamboyant character. He had a railcar, yacht and an extravagant apartment on the Upper West Side. He belonged to exclusive clubs and kept many mistresses. In the panic of 1907, Livermore made a million dollars in a single day. This was real money back then. But by 1915 he had filed for bankruptcy—and not for the first time. In the end, he lost his entire fortune and filed for bankruptcy a third time. This was in 1934, when his assets were listed at $84,000 and his debts at $2.5 million. That was his final business act. His final personal act was to shoot himself to death in the cloakroom of the Sherry-Netherland hotel in Manhattan on Thanksgiving Day, 1940.

In an era where people get their news from TikTok and Instagram, it’s not surprising that they would take the same dumb approach to learning about investing. But if you ever base your investment technique on a novel, be sure you know the ending of the real story first.

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Government of Canada announces investment in three Waterloo Region tech businesses – ITBusiness.ca

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Today, the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) announced an investment of more than $10 million in three Kitchener-Waterloo tech companies.

Miovision Technologies is a Kitchener-based company that lets cities and towns reduce traffic congestion and vehicle emissions while improving public safety through intelligent transportation solutions. With the $7.4-million repayable investment through the Jobs and Growth Fund, Miovision will develop TrafficLink and Scout, its traffic monitoring hardware and software. It also plans to increase its network by up to 100,000 intersections in North America over the next four years, and will further its transition into “Smart City” technologies, expanding its presence globally and adding 58 jobs,

Advanced Electrophoresis Solutions Ltd. is a Cambridge medical technology manufacturer specializing in the development of testing instruments for pharmaceutical companies to analyze protein structures and interactions. The repayable investment of over $1.7 million, through the Business Scale-up and Productivity stream, will allow the company to increase the production of ready-to-use customized testing instruments, and grow its sales and marketing team. Advanced Electrophoresis Solutions is looking to expand its presence in Asia and Europe while also creating 11 additional jobs within Waterloo.

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Huron Digital Pathology is a St. Jacobs-based medical equipment company that develops digital imaging solutions in the pathology field for the clinical, research and education markets. With the $1-million repayable investment through the Business Scale-up and Productivity stream, the company can increase the production of its digital pathology scanners. It hopes to revolutionize disease diagnosis by being the first company to bring to market an Artificial Intelligence (AI) enabled image search engine for use in the pathology field. Huron Digital Pathology is looking to increase its productivity. with the goal of producing over 100 scanners every year and creating 11 skilled jobs.

“Tech companies, like the three highlighted today, are what builds Waterloo region’s growing resumé of research and innovation. Canadian tech companies work tirelessly to bring new products and processes to markets that will benefit our regional economy and Canadians,” said The Honourable Filomena Tassi, Minister responsible for the Federal Economic Development Agency for Southern Ontario. “The Government of Canada is committed to supporting businesses as they adopt new digital solutions, enhance global competitiveness and create local jobs that will contribute to a growing economy that works for everyone.”

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