Homeless in Toronto: Part Deux

Open House

Topic: Human Interest

Geoffrey J. Gouinlock, CFA

May 1, 2018

Image used with permission: iStock/jsmith


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Homeless in Toronto: Part Deux

About this time last year, I wrote an article about the sale of our family home of 26 years and our decision to step away from the madness of the Toronto housing market and rent for a while (Crisis, What Crisis? Homeless in Toronto).

How smart I felt as the calendar rolled forward. In the opinion of many, we had monetized our home at the high. And although we weren’t moving explicitly because we thought we could trade the housing market, I was perfectly prepared to accept the congratulations from hither and yon who deemed us to be either lucky or far-sighted. Making the situation even better, Anne and I quickly rented a wonderful, updated home in the centre of the city where we could bide our time and wait for the housing market to crumble.

We sold in May and moved in August, entrusting the capital we withdrew to the best investment manager I know. They’re independent, service-oriented, smart and great value. We’ve been uncertain how much smaller a home we were looking for, and also a bit unclear in what neighbourhood we’d like to settle. But with time we knew the answer would present itself. Let me tell you, Saturday morning coffee tastes great as you collect your dividends and scan the papers, not looking at the slim listings, but instead reading the many stories of woe about declining home sales activity and weaker pricing. It was hard not to feel a bit self-satisfied at the decision we’d made.

Unfortunately, there was only one problem. In a most genteel, but direct, email our landlord notified us they were coming back from living abroad and wanted their house back. We need to be out in August. There’s an adage in the investment business that says, “You have to sell when you can, not when you want to.” I guess that’s the case in the real estate market as well!

So now we scan the papers looking at the slim listings wondering, do we buy or rent again? While it looks like prices are a little lower than when we sold, there’s nothing yet we’ve seen that we’d be excited about buying. And more worryingly, we’re not the only couple at this stage of life looking at rentals. Time isn’t really on our side. While I thought this spring would have weekends at the golf course, I expect now that we’ll be on the “Open House” circuit. Life can be so cruel.

In actual fact we’ll be fine. We have a good realtor working for us. My wife Anne is resourceful. And if worse comes to worst, we’ll be renting a nice place that we’re paying too much for. We’ll run up what politely gets called ‘friction costs’ and then amortize them over our future tenure at the home we eventually settle into.

Ironically, my tale of woe is remarkably similar to the discussions we have with clients. Sometimes there are disruptive surprises that upset a carefully crafted plan. Too often individuals underestimate their need for liquidity and have to sell at an inauspicious time in the market. Likewise, people expect that they can work for some fixed period of their choosing and sometimes sickness or job loss rears its head at a most inconvenient time. Its an easy mistake to make, as I’m discovering!

As you map out your own strategy for future financial independence. It’s best to have a plan, and its best to incorporate some allowance for unforeseen disruption. Use realistic return expectations and don’t fall into the trap of thinking you’ll be able to work forever. Returns and your ability to work are outside your control. While I may have lost any qualification to offer real estate advice, I can introduce you to my favourite investment manager that incorporates great planning into their service offering. GJG

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