House Poor No More (eBook)

Introduction

Your Home Is Your Key to Well-Being

I can’t remember a time when real estate—or, more specifically, a home—hasn’t factored prominently in my life. My parents and I immigrated to Canada in the 1970s and, like many immigrants, began our journey in this country renting apartments in large urban centres close to transit hubs. As our life became more established and more secure, my parents aspired to that North American dream of homeownership. After spending a few years in London, United Kingdom, where I was born, my parents were keen to become masters of their domain, kings of their castle.

Their first attempt was to purchase a bungalow perched on the bluffs of Scarborough in the east end of Toronto, Ontario. As part of the negotiation, they put down $1,000 as a deposit and then got a home inspection. The report prompted my father to cancel the deal and walk away from his deposit money (worth about $6,000 in today’s dollars). Turns out, the inspector and my father were not comfortable with the crumbling sandstone that surrounded the foundation and footings that held up the home.

The second attempt was a single-family home with a large mortgage helper that took up the second floor and attic. It was a semi-duplex in a fantastic neighbourhood in the heart of midtown Toronto. The Summerhill neighbourhood was quiet and known for its excellent schools; it felt residential but was also completely accessible to both public transit and the downtown core. My parents stretched their budget to get the home—assured that the mortgage helper would help pay the bills. A few short months later they received a notice from the fire department: upgrade to meet today’s fire code standards or remove the tenants and convert the home back to a single-family residence. The upgrades would’ve cost tens of thousands—money my single-income family did not have—and within the year, my parents were back to renting an apartment.

My parents would become property owners again but not before learning a few vital lessons—lessons my father passed on to me and lessons I have used to make better decisions not just about buying property but about debt management and regarding the achievement of all financial goals.

Believe it or not, the first lesson I learned wasn’t about finding the best property (you know, location, location, location) or following the obvious advice of buying low and selling high.

The first lesson I learned is that the fear of losing out (or losing, in general) is the worst reason to make a decision or stick with a plan. My father may have lost deposit money on that first house, but he saved himself tens of thousands in repair costs trying to shore up piers built on an eroding landmass.

The second lesson I learned: don’t trust anyone else with your own best interests. My father trusted a banker and an agent when it came to the duplex. He believed that these professionals gave him all the pertinent information about the house he was buying for his family; he trusted that no important details were kept from him since they were theoretically working for him. Sadly, that wasn’t the case.

I’m not saying every real estate professional would’ve acted the same way. Some would; many others wouldn’t. I’m also not saying that real estate professionals aren’t integral. Real estate agents, mortgage brokers, accountants, bookkeepers and lawyers are all important professionals who get involved in the home buying and selling process, but like with all professionals, some are better than others. For every story of a real estate pro going above and beyond to help, there’s another tale of someone skirting the line of ethics.

What does that mean for us Joes and Janes of the world? It means we can’t rely on others to give us answers. Although we might have questions—Is now a good time to buy? Should I renovate my home? Should I pay down my mortgage or invest?—don’t expect someone to give you the answer. Nor will you find it reading general opinions, applying generic formulas or using shortcuts or rules of thumb. These are useful but only as guides. In the end, the answers will only be found in the application of knowledge—when you take generic information and apply it to your specific situation. Then you will have answers—the right answers.

This is the ultimate aim of this book—to help you find, assess and decide what is best for you and your family using your single largest and most expensive asset in the best possible way.

Your Home: The Keystone to Your
Well-Being

To start, we must first appreciate the role our home plays in our lives.

In every ecosystem or community, there is a keystone. A keystone is a critical or vital part that helps hold the entire system together. In an ecosystem, keystone species can be either huge predators, such as grey wolves, or unassuming microorganisms such as zooplankton. Regardless of their size, the elimination of a keystone means the entire system would look and be quite different.

In North American communities, our homes are the keystone to our well-being.

On the most fundamental level, housing helps to satisfy our physiological needs: it gives us a place to sleep and protects us from the elements. But housing satisfies more than our base needs. Examine housing through the lens of Abraham Maslow’s pyramid of needs and we can begin to appreciate how comprehensive housing is at satisfying all of our needs—how it lays the foundation and sets the path for our personal and familial well-being.

How Housing Helps Overall
Well-Being

Housing can help each of us to progress through each level of motivation, as identified through Maslow’s hierarchy of needs.

Starting at the base:

Physiological: At the most basic level, the home provides our most basic needs. It’s a place we can sleep, eat and rest while being sheltered from the environmental conditions. The home satisfies our physiological needs if we can store, prepare and eat food as well as keep our belongings and ourselves safe.

Safety: The home offers security and protection for ourselves, our loved ones and our accumulated belongings. Knowing that we can explore and define our lives—through the hobbies, sports and activities we enjoy—and that we have a safe, happy place to return is an integral part of a home.

Love & Belonging: A home gives a person a chance to feel a part of—a connection to a place, a community and a city. This attachment enables homeowners the ability to focus on allowing other relationships with friends, family, neighbours and community to blossom.

Esteem: Does the home offer a sense of meaning and accomplishment? Does the owner feel a sense of pride and value about their home? Whether it’s a first home or part of a retirement plan, the home offers the owner the ability to set and achieve goals and gain respect from being successful at this.

Self-actualization: How will this home bring someone closer to their dreams and aspirations? How will this home help the owner to be creative and spontaneous, responsible and free, live within their ethics and abide by their principles? How will this home help the owner move towards becoming the most capable, best self?

It’s easy to dismiss the idea that housing meets our needs—unless you start to read the science that examines the link between emotions and the space we occupy.

For the last 40 years, academics and social scientists have been studying a concept known as “place attachment”—this is the emotional bond a person feels towards a specific space.

The theory suggests that by finding meaning and connection to a place, our self-esteem increases while our sense of meaning and belonging grows stronger. Some of these social experts will even suggest that place attachment is one of the most influential factors in humans’ psychological health, powerful enough to be a significant factor in constructing a person’s identity.

Remember Maslow’s hierarchy? The path of fulfilment goes from the satisfaction of our physical needs to the realization of our full potential as human beings. Our home enables us to find shelter in a safe space where we can develop our relationships and sense of connection, which promotes a sense of self, which leads us to develop our talents and strengths (and hopefully give back).

Through this lens, the success of HGTV and our aspirations for a Martha Stewart– or Marie Kondo–approved home starts to make sense. Our desire to own property is so strong because of our desire to define and belong to our community and to reach our full potential.

Your Home: The Keystone
to Your Wealth

What does all this have to do with buying a home and growing our net worth?

Everything.

Of course, if you’ve been involved in any conversation over the last 10 years regarding real estate, you’d be left with one of two impressions: either buying a home is smart or buying a home is foolish. Either you bought low and sold high or you simply opted not to take that foolish step and take on that financial burden of mortgage debt.

This oversimplification of a very important decision is not only useless but harmful. By reducing this important decision, we end up eliminating the possibility that someone can purchase a home as a smart financial decision even in a very expensive real estate market....