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T his is a column by regular contributor Clark. The earlier parts of the bond series dealt with the basic types of bonds and their risks and suitability . This part will begin a sub-series on corporate bonds. As mentioned in the first part of the series, corporate bonds are issued by companies to gather funds for their business. With thousands of companies issuing bonds, where does one start to make the list smaller? Credit Rating Agencies Similar to credit reporting bureaus that keep track of a consumer’s credit history , there are Nationally (US) Recognized Statistical Rating Organizations such as DBRS (short for Dominion Bond Rating Service), Moody’s , Standard and Poor’s (the S&P Indices fame) and Fitch Ratings that issue credit ratings for companies. These agencies offer a rating system to aid investors in determining the risks associated with investing in any company. Debt could be secured or unsecured and there are specific ratings for short-term debt, long-term debt, preferred stock, etc. A glance at the long-term credit ratings of a company (that also considers assets or collateral needed in case of default) would show the company’s ability to fulfill its debt obligations and credit worthiness. It must be noted that credit ratings are not meant as alerts to buy, hold or sell; they are just a tool to assess a company’s capacity to pay back debt . Foreign Currency Debt Companies may borrow from lenders inside and/or outside the country (for example, Canadian companies may make use of US banks and vice versa). As would be obvious, borrowing from foreign lenders comes with currency rate fluctuations. Repaying a local (as in country) lender is straightforward – if the company has the money and willing to repay, then the debt is paid. But, in the case of foreign currency debt, companies would have to consider currency rates and decide if it is lucrative to repay debt at that existing currency rate or watch market forecasts and calculate if they would be in better health by holding off until when they think the exchange rate will be stronger (they may also invest overseas at such a time). Foreign currency debt throws another variable into the mix but thankfully, agencies evaluate an organization’s ability to repay debts in local and foreign currencies. If the organization has foreign currency debt but does not have sufficient foreign currency reserves, then their rating may be lower. Corporate Credit Rating Corporate credit ratings range from the highest quality (best) to junk level (worst). Agencies use different designations but in general, long-term ratings are denoted by the letters AAA (triple A), which is the best credit rating (meaning low credit risk) and C or D (based on the agency) is the worst (default level as in failing to meet obligations). There are subsets to the basic category, which might involve a “+” or “-” sign to indicate subclasses (again, varies based on the agency). For example, the Fitch Ratings use AAA, AA, AA, BBB for investment grade and BB, B, CCC, CC, C, D and NR (not rated) for non-investment grade bonds. A good credit rating helps a corporation attract new partners or retail investors, apply for an increase to their line of credit, or sell their business. Sovereign Credit Rating A sovereign credit rating provides information about a country’s ability to provide a stable and secure investment market. This rating is contingent on a country’s economic status, market transparency, foreign investments, currency (local and foreign) reserves, and political stability to name a few. Potential investors can analyze the country-level risk associated with the company they are looking at and arrive at their decision. A sovereign rating is critical, since it will boost the country’s prospects in terms of pulling in foreign investments and assisting in the growth of the economy. In the next part, we’ll look at some metrics worth knowing about when purchasing corporate bonds. About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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A Primer on Corporate Bonds – I (Credit Ratings)

A n economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today. – Laurence J. Peter Our last article explained why the economy is not relevant to investing – short term. If you want to forecast the stock market this year or next year, the economy is essentially irrelevant – because the stock market forecasts the economy, not the other way around. More surprising for investors, however, is that even the long term growth of the economy is not relevant to investing! Most investors mistakenly believe that, over the long run, stock prices rise because of growth in profits brought on by the economy. Specifically, the belief is that the long run stock market growth = economic growth + change in multiple (normally expressed as P/E, or Price/Earnings multiple). This is widely believed, even though it is obviously false when you look at the numbers! The actual stock market growth in most countries is many times the economic growth long term (see chart below). A related “conventional wisdom” is that countries that have a strong economy will have a strong stock market. This sounds perfectly logical – it’s just not true. In fact, the opposite may be true! For example, many news stories gloat about the high growth of the economy of China at about 10%/year. This is used to claim that investing in China will be a good investment. Recently, other news stories speculate that the US and Canada may have slower growth for a few years, and this is used to suggest that the stock market returns may also be lower. However, in-depth studies comparing countries with high growth economies show this does NOT translate to higher stock market growth. In fact, if anything the opposite is true! The most in-depth study we have seen is in the classic investment book on global stock markets “Triumph of the Optimists”, Dimson, Marsh & Staunton. They analyzed the correlation of GDP growth to the stock market in 17 major countries from 1900-2000 and found: Correlation of GDP Growth to Stock Market Time Period Correlation What it Means 1900-2000 -.27 Negative correlation 1950-2000 -.03 No correlation Note that “negative correlation” means that they tend to move in opposite directions – higher GDP growth generally resulted in lower stock market growth, and vice versa. Higher GDP does NOT mean it is a better place to invest. Their conclusion: “Since 1900, low-growth economies have superior stock market performance. Historically, buying into equity markets with a high GDP growth rate has given a return that is below the return of markets with a low GDP growth rate. There is no apparent relationship between equity returns and GDP growth.” – Global Investment Returns Yearbook 2005, Dimson, Marsh and Staunton. Figure:  Higher stock markets generally were in countries with lower GDP growth in their economy. Source: “Triumph of the Optimists”, Dimson, Marsh & Staunton. In another study, Jeremy Siegel compared GDP growth to stock markets from 1970-97 and came to the same conclusion: Correlation of GDP Growth to Stock Market Type of Country Correlation What it Means 17 developed countries -.32 Negative correlation 18 emerging markets -.03 No correlation Jeremy Siegel also did a 107-year study from 1900-2006 with the same conclusion: “The results are striking. Real GDP growth is negatively correlated with stock market returns. That is, higher economic growth in individual countries is associated with lower returns to equity investors.” – Jeremy Siegel, Stocks for the Long Run. Ken Fisher (star fund manager and columnist for Forbes) in his myth-busting book, “The Only Three Questions You Need to Ask” explains: “A major error investors make in foreign investing – developed countries as well as emerging markets – is assuming a country with a growing GDP must have good stock returns. By the same logic, a flat or negative GDP is often assumed to lead to poor stock returns. This easily debunked Question One myth has been a major cause for investor interest in China over the past few years.” This myth is popular because people like to have very simple methods of understanding what is going on and because human beings are wired to see correlations whether or not they exist. Economic data is widely covered in the news with many news stories trying to relate it to the stock market. For investors that do not have an in-depth knowledge of stock markets and market history, the economy provides a simple way to talk about the market in broad generalities. Bottom line: Countries with lower GDP growth generally have better stock markets. The economy and the stock market are different like “chalk and cheese”. The reasons that slower growing economies generally have higher stock market growth are not fully understood, but here are the most likely reasons: 1. Expectations of the economy are built into prices of stocks: Jeremy Siegel believes it is because the higher economic growth is built into stock market prices ahead of time and that it is often overly-optimistic. The price investors are willing to pay for a stock or mutual fund includes their expectations for how good an investment it will be. Therefore, investments in countries or sectors that are expected to perform well will tend to be at over-valued – which means their future returns will likely be lower. 2. Companies have many ways to grow profits: Our opinion is that companies are able to adjust their operations to continue to grow their profits, whether or not the economy is growing strongly. Management is focused on annual targets to grow their profits and can do this in many ways – cost cutting, more efficient systems, new products, new technology, selling unprofitable divisions, buying competitors, gaining customers from competitors, new marketing/advertising programs – or replacing the management. Management is expected to grow profits regardless of the economy. 3.The economy is based on gross and the stock market is 15 times net: As an accountant and a finance guy, it is easier to see why they are not a proper comparison. The economy is related to the “total output” of the country, which includes the sales or income of companies (and governments, etc.), while the stock market is normally based on a multiple of the profits or bottom line of companies (typically 15 times). A comparison to your personal budget could be that the economy is like your salary (your gross), while the stock market is like 15 times the money you have saved/invested or have left over at the end of the month (your net). When you think of them this way, you can see why they may grow completely differently for many reasons. For example, if you get a 10% raise, does that mean you will have 10% more money left over at the end of the month? Maybe/maybe not. If you reduce an expense (pay off a loan or buy a cheaper car), your bottom line soars (especially when you multiply it by 15), even though your salary/income did not change. This is why the formula is false: stock market growth (15 times net) = economic growth (1 times gross) +/- change in multiple. You can’t compare 1 times gross to 15 times net! 4.The stock market is linked to the total of all shares, not to the average price per share. Jeremy Siegel also believes that “economic growth influences aggregate earnings and dividends favourably, economic growth does not necessarily increase the growth of per share earnings or dividends . This is because increased growth requires capital expenditures…” (Stocks for the Long Run). He believes that it costs money to support higher growth. This is either borrowed, which lowers profits, or financed by issuing new shares, which lowers the profit per share. 5.The economy and the stock market are like “chalk and cheese”. Companies and the economy are just different. For example: Ken Fisher, “The Only Three Questions You Need to Ask” explains : “Prices are determined by shifts in supply and demand, which may or may not parallel whether GDP growth is strong, weak, or nonexistent.” Some factors affect them differently . For example, high unemployment is clearly bad for the economy, but is arguably good for companies in the stock market. It means that some consumers are less likely to spend money, but on the upside, it also means that there is an available workforce, less pressure to increase wages, and that they are more likely to keep their best employees. The stock market is not the same companies over time . Obsolete or unprofitable companies are replaced by more profitable, innovative companies, especially in a slower economy. Conclusion The economy is not really relevant to stock market investing – short term or long term. I realize this belief is very ingrained in the thinking of many investors, who may find it difficult to understand the stock market without thinking of the economy. However, a growing body of evidence continually confirms that economic growth is not necessary for good stock market returns – and in fact lower economic growth may promote good stock market returns. The stock market does what it does – grows significantly long term with 1 or 2 bear markets per decade – generally regardless of what happens in the economy. If you are an investor, your limited time is best spent on things that are definitely relevant, such as understanding stock market history and researching the quality of your investments. Forecasts and conjecture about the short or long term economic outlook or growth rates for the economy, sector or country may amount to just “market noise” or distraction to be avoided in your investment decisions. Reader Poll Since the reasons that slower growing economies tend to have faster growing stock markets is not fully understood, which of the 5 explanations do you believe is correct (or do you still believe that growth of the economy is necessary for the stock market to grow)? About the Author: Ed Rempel is a Certified Financial Planner (CFP) and Certified Management Accountant (CMA) who built his practice by providing his clients solid, comprehensive financial plans and personal coaching.  If you would like to contact Ed, you can leave a comment in this post, or visit his website EdRempel.com .  You can read his other articles here . Popular Posts: The Smith Manoeuvre – A Wealth Strategy – I The Smith Manoeuvre – A Wealth Strategy – II Canadian Discount Brokerage Comparison Top Cash Back Credit Cards in Canada Child Care Tax Credits Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Why the Long Term Growth of the Economy is Not Relevant to Investing

W elcome to the Million Dollar Journey August 2010 Net Worth Update - RRSP Contribution Edition. It’s a little past halfway through the year and I finally got my act together and made our  RRSP contributions .  I figured since our cash savings was buiding up, we might as well put it to some use.  The bright side is that we’ll get the tax deduction for 2010 tax year, but the other side is that I’ll need to find a place to invest the cash.  In total, we contributed $23,000 in our combined RRSP’s which is pretty close to our contribution limit for the year. What do you typically do with cash sitting in an investment account?  Do you simply put it in a money market fund?  Or perhaps short term bonds? I haven’t been doing too much buying lately, with most of the action happening within the RESP acccount .  If you recall, the RESP account is indexed with the TD e-Series set of low cost mutal funds .  As it’s a common theme, it was close to 40% cash, but I managed to transfer some to the various funds during the correction in July.  I’ll be moving more of the cash with every market dip going foward. In terms of savings, besides the contributions, our cash savings was stronger than usual as we finally collected on some long overdue receivables. On to the numbers: Assets : $ 537,350 (+1.02%) Cash: $4,500 (+0.00%) Savings: $35,000.00 (-30.00%) Registered/Retirement Investment Accounts ( RRSP ): $98,000.00 (+0.26%) Tax Free Savings Accounts ( TFSA ):  $19,700 (-0.47%) Defined Benefit Pension: $30,800.00 (+1.15%) Non-Registered Investment Accounts: $11,600.00 (-5.69%) Smith Manoeuvre Investment Account : $54,500.00 (-0.91%) Principal Residence: $283,250 (+0.00%) ( purchase price adjusted for inflation ) Liabilities :  $66,400.00 (-2.64%) Principal Residence Mortgage ( readvanceable ): $11,800.00 (-14.49%) Investment LOC balance: $54,600 (+0.37%) Total Net Worth: ~$470,950.00(+1.56%) Started 2010 with Net Worth: $399,600.00 Year to Date Gain/Loss: +17.86% Some quick notes and explanations to net worth questions I get often: The Cash The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees (accounting for regular bill payments). Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker can prove useful. Savings Our savings accounts are held with PC Financial and ING Direct . We usually hold a fair bit of cash in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair.  We also need cash to cover any future tax liabilities. Real Estate Our real estate holdings consist of a primary residence plus a rental property . The value of the principal residence remains valued at the purchase price (+inflation) despite significant appreciation in the local real estate market. Pension The pension amount listed above is the value of both of our defined benefit pension plans.  I basically take the semi annual statement and add the contribution amounts (not including employer matching) on a monthly basis. Stock Broker Accounts Another common question is which discount broker do I use?   We actually have accounts with multiple institutions.  I’m hoping to reduce the number of accounts that we hold in the near future.  Here is a review of some of the more popular online stock brokers . Popular Posts: How capital Gains Tax Works How Dividend and Interest Income Tax Works Registered Education Savings Plan (RESP) Top Cash Back Credit Cards in Canada Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Net Worth Update August 2010 (+1.56) – RRSP Contribution

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F lipping Houses for Profit @ in the Archives (1 year ago today) Is the Market Headed for a Rollover Accident? @ Balance Junkie Thoughts on Electric Cars @ Canadian Money Forum Geothermal Home Heating Case Study – Going Green Puts Green into Your Pocket @ Canadian Financial DIY Advice To Future University Students @ Canadian Personal Finance Blog Carnival of Personal Finance @ Live Real Now Social Media is a Waste of Time – But Can’t be Ignored @ WalletPop Free ACB & Capital Gains Tracker in Excel @ Canadian Capitalist 50 and Broke? Early Retirement Planning Can Help @ Canadian Dream 6 Reasons Canadians Should Invest In Oil Stocks @ Money Smarts Blog Catching a falling knife (continued) – RIMM & BP @ Intelligent Speculator The value of advice @ Thicken My Wallet The Costs of an In-Ground Pool @ Michael James on Money budgeting sustainably for real life @ The Money Gardener Interview with the Secretary General of Luxembourg for Finance @ Where Does All My Money Go 5 Tips to Managing Your Finances and Avoiding Debt @ Financial Highway The Power of Progress @ Canadian Finance Blog How Personal Finance Changes as You Begin to See Success @ The Simple Dollar How to Build Confidence and Overcome Fear @ Get Rich Slowly Popular Posts: The Smith Manoeuvre – A Wealth Strategy – I The Smith Manoeuvre – A Wealth Strategy – II Canadian Discount Brokerage Comparison Top Cash Back Credit Cards in Canada Child Care Tax Credits Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Flipping Houses, Electric Cars, Market Roll Over and More

T his is written by our resident real estate guru Rachelle. In many of my past columns I have discussed the problems of buying real estate in our current market. I have mostly decried that current prices, even at today’s interest rates, are too high to make a profit. I have also warned of the dangers of investing without including proper expenses such as property management, vacancy and maintenance expenses. I have said that it is possible to find properties that can be considered investments but the search will be long and arduous especially if you are buying in the larger centres such as Toronto. Many investors want to invest in real estate but do not want to deal with the problems associated with owning property directly. Real estate is far from passive. Many people, FrugalTrader included , have bought and then subsequently sold their properties because of this. Let’s face it… you work, you’re tired and an extra rental house or two requires working some more, on evenings and weekends, when you’d rather be watching a movie and having a beer. The other problem with the extra work is that you’d make more at a minimum wage job. All in all it’s not worth it for many. The Exit of Experienced Investors In the last few year there has been an exodus of small landlords cashing out. I had one gentleman, a landlord for 20 years, tell me that it just didn’t make sense anymore. He could sell his house for $600,000 plus or rent it for $1600 per month with all the risks associated with bad tenants . There just wasn’t enough profit in the business and too much appreciation of the properties to maintain a rent/price ratio. For many longtime landlords this was the equivalent of winning a lottery. The skewing of the rent/value ratio is a sign of a out of balance real estate market. The REIT Solution One solution I hear over and over is why bother with buying my own properties when I can just buy a REIT ? Usually this would work. You could profit from the asset class with out having to actually own and maintain and rent anything. You could watch your movies and have your beer in relative peace, however, there are problems with this strategy. The REIT Problem One of the major problems when buying REIT’s is the lack of control. When buying you make a number of assumptions that you may not be aware of such as the value of the assets they hold and the benefits of professional management. When you buy a share, that money is used to purchase real estate assets and they use the money generated by those assets to pay you a distribution. You have to trust that they are doing a good job and are not using Hollywood Accounting. REIT’s Are Not Protected From The Real Estate Market If you consider the indicators and the recent news that there are significant problems with the valuation of real estate in today’s market, you also have to consider that REIT’s will also take a severe hit if valuations of real property fall. I had lunch with a mortgage broker who works for a major pension fund a few weeks ago and she was saying that it is common place for REIT’s to have a 75% loan to value ratio on their properties. Some of these REIT’s claim they have a much lower loan to value ratio of 50%. She sees their mortgages so I’m inclined to believe her. Lemming Behaviour affects the Stock Market Even REITs with great, stable portfolios will not escape a real estate market adjustments. Once market sentiment turns and the fear takes hold, prices on REIT shares will go down. If the value of their assets fall then their ability to remain liquid and refinance will take a severe hit. Many industries are dependant on prices of real estate going up. Employment takes a hit along with building materials suppliers. The economy as a whole suffers. Deleveraging My very first property management job was in a multi res building that had changed hands 6 times as the real estate market deleveraged. As values fall companies must sell off assets to keep their loan to value ratios intact. Of course other potential buyers are also affected by the same market values and experience the same problems and a plummeting effect occurs. Lenders ask for more security as they suspect that prices may go down even further. So Should You Buy A REIT? Go ahead and buy if you think the real estate market fundamentals are healthy. If you think that current valuations of real property are too high, don’t buy REITs as an alternative…they’re just as vulnerable. They are listed on the stock market but the values of their assets are linked to the real estate markets. REITs are buying in the same real estate market as you are. They have even more pressure on them to buy than you do, every quarter they have to prove that they are wisely investing shareholders money, they can’t sit around with piles of cash even when they should. What are your thoughts on current REIT valuations ?  Would you buy at these levels? About the Author : Rachelle specializes in renting property on behalf of landlords and is the blogger behind Landlord Rescue . She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability. Check out some of her other real estate posts on MDJ. Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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The Downside of Owning REITs

These money saving tips will help get the housecleaning chores done for a fraction of the normal cost and leave the house sparkling clean and smelling good.

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To please my reading habit, I go to the library (or get publishers to send me free books for review)
When buying consumer items, I try to separate my “needs” and my “wants”.

Money Saving Tips for Housecleaning

T his is a column by regular contributor Clark. This blog has recently featured a number of posts about real estate . I figured that a tenant’s perspective on the relationship would do justice. I have shared an apartment during my school days and currently rent one level of a house on my own. I’d like to list some points from my renting experience that I find make for a good, if not great, landlord-tenant relationship. 1) Promptness. From my side, this includes paying rent on time and reporting problems at the earliest. The landlord has duly issued a receipt each month and responded to problems swiftly. Due to my trust, sometimes, I drop off a check, forgo collecting the receipt immediately (it is usually the landlord who is busy on the phone or with someone else) and get it along with the next month’s receipt. Rent is due on the 1st of the month but due to holidays or landlord’s unavailability, once-in-a-while, I’ve paid it several days later too. But, say, I make it a practice to pay it on the 5th of each month and the landlord does not object (since we have developed mutual trust); if we ever go to court for late payment, the landlord cannot use the original lease agreement that says “rent is due on the 1st of each month”, since an estoppel would prevent him from doing so. An estoppel would thwart the landlord (or tenant as the case may be) from going back on the position (collecting rent on the 5th) that he previously took, either by deed or silence. This is something both parties should be aware of, more so landlords with late payment issues. 2) Respect. I treat the property as my own and I say this in a good way. I maintain the place as though it were my own. Being a minimalist helps, since I don’t have clutter and the house is easier to clean. 3) Privacy. It is probably basic courtesy but I’ve never had my landlord knock on the door at unearthly hours as valid as the reason could be! When he has come unannounced, he has been apologetic and always had a good excuse. 4) Trust. There have been times when there were renovations occuring in the evenings. I waited a couple of days thinking that they may have had an emergency to attend to on those days and hence, were trying to finish the day’s quota at all costs. But, on the third day, there was some drilling going on and my patience ran out. Luckily, the landlord was around helping out with the work; I called him outside and explained that I did not sign up for what was happening and that it was starting to get irritating. He apologized and said that he will make sure that there was no noisy work after I got home and they would keep it to painting. He kept his promise. Maybe, we did not set terms explicitly or he took advantage of our good relationship. Either way, a little talk solved the issue and I’m sure it’ll pay dividends in many other cases too. I realize that many landlord-tenant problems arise due to money-related issues but there are other factors that should be considered for a seamless stay. I haven’t covered situations such as unfair rent increases, abnormal restrictions, tenants fixing a problem on their own (against the agreement) since it happened on a weekend or the landlord was not immediately available, etc., as I do not recall any from experience. If you’ve ever been a tenant, how was your experience? Do you have any stories or tips that would improve the experience for both parties? About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Child Care Tax Credits Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Landlord-Tenant Relationship (A Tenant’s Perspective)

T his is a column by regular contributor Clark. This blog has recently featured a number of posts about real estate . I figured that a tenant’s perspective on the relationship would do justice. I have shared an apartment during my school days and currently rent one level of a house on my own. I’d like to list some points from my renting experience that I find make for a good, if not great, landlord-tenant relationship. 1) Promptness. From my side, this includes paying rent on time and reporting problems at the earliest. The landlord has duly issued a receipt each month and responded to problems swiftly. Due to my trust, sometimes, I drop off a check, forgo collecting the receipt immediately (it is usually the landlord who is busy on the phone or with someone else) and get it along with the next month’s receipt. Rent is due on the 1st of the month but due to holidays or landlord’s unavailability, once-in-a-while, I’ve paid it several days later too. But, say, I make it a practice to pay it on the 5th of each month and the landlord does not object (since we have developed mutual trust); if we ever go to court for late payment, the landlord cannot use the original lease agreement that says “rent is due on the 1st of each month”, since an estoppel would prevent him from doing so. An estoppel would thwart the landlord (or tenant as the case may be) from going back on the position (collecting rent on the 5th) that he previously took, either by deed or silence. This is something both parties should be aware of, more so landlords with late payment issues. 2) Respect. I treat the property as my own and I say this in a good way. I maintain the place as though it were my own. Being a minimalist helps, since I don’t have clutter and the house is easier to clean. 3) Privacy. It is probably basic courtesy but I’ve never had my landlord knock on the door at unearthly hours as valid as the reason could be! When he has come unannounced, he has been apologetic and always had a good excuse. 4) Trust. There have been times when there were renovations occuring in the evenings. I waited a couple of days thinking that they may have had an emergency to attend to on those days and hence, were trying to finish the day’s quota at all costs. But, on the third day, there was some drilling going on and my patience ran out. Luckily, the landlord was around helping out with the work; I called him outside and explained that I did not sign up for what was happening and that it was starting to get irritating. He apologized and said that he will make sure that there was no noisy work after I got home and they would keep it to painting. He kept his promise. Maybe, we did not set terms explicitly or he took advantage of our good relationship. Either way, a little talk solved the issue and I’m sure it’ll pay dividends in many other cases too. I realize that many landlord-tenant problems arise due to money-related issues but there are other factors that should be considered for a seamless stay. I haven’t covered situations such as unfair rent increases, abnormal restrictions, tenants fixing a problem on their own (against the agreement) since it happened on a weekend or the landlord was not immediately available, etc., as I do not recall any from experience. If you’ve ever been a tenant, how was your experience? Do you have any stories or tips that would improve the experience for both parties? About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Child Care Tax Credits Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Landlord-Tenant Relationship (A Tenant’s Perspective)

T his is a column by regular contributor Clark. This blog has recently featured a number of posts about real estate . I figured that a tenant’s perspective on the relationship would do justice. I have shared an apartment during my school days and currently rent one level of a house on my own. I’d like to list some points from my renting experience that I find make for a good, if not great, landlord-tenant relationship. 1) Promptness. From my side, this includes paying rent on time and reporting problems at the earliest. The landlord has duly issued a receipt each month and responded to problems swiftly. Due to my trust, sometimes, I drop off a check, forgo collecting the receipt immediately (it is usually the landlord who is busy on the phone or with someone else) and get it along with the next month’s receipt. Rent is due on the 1st of the month but due to holidays or landlord’s unavailability, once-in-a-while, I’ve paid it several days later too. But, say, I make it a practice to pay it on the 5th of each month and the landlord does not object (since we have developed mutual trust); if we ever go to court for late payment, the landlord cannot use the original lease agreement that says “rent is due on the 1st of each month”, since an estoppel would prevent him from doing so. An estoppel would thwart the landlord (or tenant as the case may be) from going back on the position (collecting rent on the 5th) that he previously took, either by deed or silence. This is something both parties should be aware of, more so landlords with late payment issues. 2) Respect. I treat the property as my own and I say this in a good way. I maintain the place as though it were my own. Being a minimalist helps, since I don’t have clutter and the house is easier to clean. 3) Privacy. It is probably basic courtesy but I’ve never had my landlord knock on the door at unearthly hours as valid as the reason could be! When he has come unannounced, he has been apologetic and always had a good excuse. 4) Trust. There have been times when there were renovations occuring in the evenings. I waited a couple of days thinking that they may have had an emergency to attend to on those days and hence, were trying to finish the day’s quota at all costs. But, on the third day, there was some drilling going on and my patience ran out. Luckily, the landlord was around helping out with the work; I called him outside and explained that I did not sign up for what was happening and that it was starting to get irritating. He apologized and said that he will make sure that there was no noisy work after I got home and they would keep it to painting. He kept his promise. Maybe, we did not set terms explicitly or he took advantage of our good relationship. Either way, a little talk solved the issue and I’m sure it’ll pay dividends in many other cases too. I realize that many landlord-tenant problems arise due to money-related issues but there are other factors that should be considered for a seamless stay. I haven’t covered situations such as unfair rent increases, abnormal restrictions, tenants fixing a problem on their own (against the agreement) since it happened on a weekend or the landlord was not immediately available, etc., as I do not recall any from experience. If you’ve ever been a tenant, how was your experience? Do you have any stories or tips that would improve the experience for both parties? About the Author: Clark is a twenty-something Saskatchewan resident employed in the manufacturing sector. He repaid around $20,000 in student loans and has been working to build his investment portfolio as a DIY investor (not trader) while nurturing plans to retire early. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. Popular Posts: Canadian Discount Brokerage Comparison Top 6 ways to Save on Auto Insurance High Interest Rate Savings Accounts MBNA SPG Credit Card Review Child Care Tax Credits Questrade Review Are Hybrid Vehicles Worth it? Tax Free Savings Account (TFSA) Copyright 2010 MillionDollarJourney – All Rights Reserved

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Landlord-Tenant Relationship (A Tenant’s Perspective)