Blessed by the Potato

Fact: an “investor” buying a condo in Toronto today quite likely faces negative cashflow and poor projected investment returns based on current rents. The three reasons for buying in such a situation are that rents will increase — and increase fast enough to matter/before interest rates rise; that there will be price appreciation; or that the investor is making a mistake. Well there certainly was price appreciation in the past, and appreciation can beget appreciation until a bubble pops. Current and future buyers may not be counting on appreciation as much though, as expectations temper and we see flat or negative price growth (year-over-year price changes were negative for 416 condos in 5 of the last 12 months, and under 2% in all but 4).

That leaves rent increases. Urbanation puts out a quarterly report claiming staggering amounts of rent increases (figures that look even higher as they report price per square foot in a market with ever-smaller units). I mean, they don’t come close to keeping up with the kind of price appreciation seen over the past decade, but staggering compared to our expectation of rent increases from CPI inflation and the Ontario rent control increases. This news often gets picked up by the Star (with breathless headlines) and these high inflation figures get stuck in the minds of some. Personally, I’ve doubted these figures, as they don’t jive with my anecdotal experience or other data sources on rent inflation.

A new report from Veritas has ignited a bit of a spat, as they report a small amount of rent deflation. They also explicitly track and project the negative cash flow for an investor buying a condo in Toronto today. Urbanation took to their blog to try to debunk the new report and reinforce why we should listen to them instead.

What I found particularly shocking in Urbanation’s post is that they themselves don’t have a good handle on what proportion of the market their data is sampling. As far as I can tell, nobody does. They claim to capture 2/3 of the [condo] rental market. I back-of-the-envelope it and get more like a quarter of it (and a non-randomly selected quarter at that). And I think that says just how bad the data is: the biggest, splashiest report on the matter uses a non-random subset of data with several potential selection and reporting biases, and no one can even say what proportion of the population their sample represents or how representative it is. Smaller spot-check “mystery shopping” samples are potentially not as accurate, but nevertheless the fact that they disagree should call into question how much weight we give either figure. Nobody can even say whether the average rental tenancy lasts 3 years, 5, 7, or something in-between. Urbanation just takes an unsupported stab at 5 years below (20% turnover), and assumes that’s the same for owner-occupied and rental units:

Who’s [sic] research should be taken with a “grain of salt”?
We recognize that transactions through the MLS system don’t represent all activity in the condo rental market, but we do believe it represents the strong majority. […] The ‘true’ annual turnover rate of all condos is likely closer to 20%

[Emphasis mine]

Yes, whatever slice Urbanation gets from MLS will be bigger than the slice Veritas sampled on Craigslist and their mystery shopping adventure, but that’s not the point*. The take-home message is that they are both imperfect samples saying very different things about the market. We need to view the whole thing as a lot fuzzier than we have been: both reports likely have large margins error, and it looks like all we can say about rents on condos is that they’re basically flat, plus or minus 5%. Heck, the Ontario rent control rate may be the best estimate of rent inflation out there.

* – Even though bigger is usually better in sampling and stats, a bigger biased sample is still a biased sample.

It has been a crazy few weeks around here, largely because of some large projects at work with nearly overlapping deadlines. I’ve had to put in a massive amount of overtime to keep everything on track. It started back in mid-September with an all-nighter for one project that had a deadline of midnight on Sunday, and I didn’t get the final material to edit and compile until Saturday afternoon. We pulled it together and sent it off just after 6, “six hours ahead of schedule” one guy quipped on the conference call. No, I muttered, our schedule was not to go right up to midnight on a Sunday, the schedule was to finish on Friday and kick it for the weekend. Anyway, I can tell I’m getting old because it’s becoming hard to recover from those all-nighters. And with the next four projects in the pipeline that followed right on the heels of that one, it’s been almost two months of feeling drained and on the edge — I’m just now getting into recovery mode. Things were busiest the last few weeks (as you could probably tell when the blog went dark), with a few hundred-hour weeks in there (technically the worst one was only 88 hours of work, but add in meal times at work and commuting time, and I was on my feet not relaxing for a craptonne of time), followed by a conference.

Like many employers these days, mine is looking to control staffing costs by not paying out overtime; instead we get time-in-lieu (i.e., if I work an extra day on a project, I get to take a day off at some quieter time in the year). It’s an understandable compromise, acknowledging that 88-hour work weeks are not normal while trying to stick to a budget. But for employees this is a tough system, especially if a quiet period to burn banked time never really comes (due to the nature of the work or chronic under-staffing). Moreover, working overtime has costs, particularly as a new parent. You may be eating out more in your rush, have more parking costs as you skip transit or walking to get a few precious minutes back, and of course daycare and babysitting. Then there’s the toll on personal health from the stress of a major project and burning the midnight oil.

Getting time off is a good way to catch up on the family time you missed out on (indeed, I just spent the day playing with Blueberry). But it doesn’t make up for the monetary costs of working more. A good balance would be to pay out some overtime (e.g., if someone hits time and a half territory, pay out the half), though there’s nothing I can do about that for my current position.

Without changing the policies of a large bureaucracy, one way to put back the hole in the budget that crazy hours (and pizzas) burned is to use the time off to do freelance work¹. In my case, I’ve had a few ideas on that front, and one possible project on the back burner — and now have enough lieu time to pursue some of them. I doubt I can ever find a time quiet enough to take it all in one chunk (scheduling my normal vacation is hard enough), so it’ll likely be burned off as a day or so per week (at this point I won’t have to work another Monday from now through June). Most likely I’m going to start working on the 2nd edition of my book, and maybe look at a dead tree edition. Fortunately, Wayfare’s work is fairly flexible, so if I can take more time off to watch Blueberry, she can work more to repair the hole in the family budget.

If freelance isn’t an option for you, then time-in-lieu may be a chance to save money around the house, for instance by making more things from scratch. Failing that, you can take a day to just relax, and let the expenses sort themselves out in the budget somehow.

1: Which leads me to: hey, I’ve got time banked. Who has a project for me?

I normally try very hard to resist the urge to plaster pictures of adorable Blueberry all over the internet, but this was so cute I just couldn’t resist.

I had put the skeleton in her wagon thinking it would make a neat, creepy prop. She’s never before had any interest in pulling her wagon, only riding in it. But with a new friend in there who needed a ride she just grabbed the handle and was off! Wayfare says she was at it for nearly half an hour. Then at the end, she went up and gave the skeleton a kiss. Awww.

Anyway, hope you all have a wonderful Halloween.

Just got this in the old work email:

Colleagues,

October is Ultrasound Awareness Month and I would like to take this opportunity to recognize our Ultrasound Technologists (Sonographers) for their contribution and efforts to the organization over the past year.

Nope. That is it. First it was a proliferation of ridiculous days, the pinnacle of which was the self-parodying Talk Like A Pirate Day. Then some things started getting months: Prostate Cancer took November after Breast Cancer grabbed October. Kind of a dickish move: there are only 12 months and December is totally Christmas’ bitch so there’s really only 11 for all the causes in the world to play with. Cancer is kind of big so sure, it can take a month (at least Ovarian decided to share October with Breast), though 2 is really pushing it.

But Ultrasound Awareness Month? Nope, no it isn’t. That is not a thing. Not even if you try to slip it in when the month is almost over and get it to share with Breast Cancer, Halloween, and changing leaves. I don’t even think ultrasound merits a day: let’s give them 35 seconds of ultrasonic screeching at lunch and get on with our lives. Come on, ultrasonographers get to take pictures of people’s babies. How much more recognition, appreciation, and job satisfaction do you need than a weepy mom-to-be finding out the sex of their bundle-of-joy-in-progress?

I mean, there’s trying to get recognition for a group of people who likely deserve it, which is great. But a month for ultrasonographers is just so far beyond the pale. It’s gone way beyond standing up to tout accomplishments, sharing stories of determination, and being recognized for hard work and contributions to being a dickhead braggart “hey look at me I’m totally better than all of you! Appreciate me! For a whole month!” Yes ultrasound helps deliver more effective health care, but nurses only get a day and they have to clean up shit* and injure their backs lifting people. Do you think you’re better than nurses — 31 times better than nurses? Moms, dads, secretaries, the entire organized labour movement, and motherfucking veterans only get one day each. Get over yourselves, god.

Damn those cocky sonographers and their ridiculous professional association’s ambitions.

Seriously, at what point do we get to say “nope, no it isn’t” when someone tells us it’s X appreciation/awareness month? At what point do we have a moral responsibility to stand up to a self-interested trade association trying to take over a whole month? Of course, Prostate Cancer Awareness Month (November) is also shared with Alzheimer’s, Lung Cancer, Diabetes, COPD (yes, lung gets two entries), Financial Literacy, and an insane approach to novel writing, which kind of underlines my point that it can’t be all of these things so this notion of a month dedicated to awareness is a little ridiculous. Let’s also consider what foolishness a dedicated month of something gets us: if it weren’t for Julius and Augustus Caesar awareness months, September through December would still be the seventh through tenth months of the year, and their names would make sense.

* – By which I mean actual human feces, but also urine, blood, pus, and other sundry smelly fluids.

My mom and my aunts were quite concerned with my grandfather’s mental state as he aged. It was becoming clear that he was suffering from the onset of dementia and cognitive impairment (Alzheimer’s specifically), but nobody knew what to do. Most of the time he was fine: dementia isn’t a one-way slide into a mental fog, it’s got its good days and its bad. And living out in the country, just him and my grandmother, driving was an essential part of their lives. Yet clearly ensuring a 3,000 lbs guided missile was always safely operated was a priority for the safety of him and everyone else on the roads. Any discussion of selling the car or turning in his license was a major fight though, with nothing but hurt feelings all around as the girls found themselves up against an immovable object time and again, and not really being sure themselves how essential it was to “ground” him. Then one day while driving he merrily crossed to the other side of the road and sped along, completely oblivious to the fact that he was going the wrong way. Fortunately the lack of traffic on a PEI rural highway meant no one got hurt, and that incident galvanized my aunts and they made him give up his license. Since then, the issue of people being competent to drive has entered more prominently into the national consciousness, and Ontario for one changed its licensing so that seniors had to take regular renewal exams, and made it easier for physicians and family members to report a potentially dangerous driver.

Driving is so contentious because it’s so closely linked with a person’s sense of freedom and mobility; many even view it as a right. Yet it is also visible: you can tell when your parents are uncomfortable heading out at night or in the rain, and you might be in the car when you notice them run a red light, take long enough to get going at a green light that the queue behind them is honking angry, or cross over to drive on the left. Some new technologies like lane keep assist can help improve the margin of safety and keep them driving longer, but you know that one day the decision will have to be made.

Less discussed is what happens to a person’s finances. Even aside from being capable, do they have the interest in rebalancing funds in a passive portfolio? Are all the bills getting paid on time, or are some slipping through the cracks? It’s a much tougher nut to crack: we face significant societal taboos to not discuss finances or mental health, and unlike driving there are no innocent bystanders being run down nor are the problems visible. Also unlike driving, finances can be handled at your own pace, and you can wait until you’re having a good day to deal with them (and for the most complex investing decisions, one day per year may suffice).

Still, the major question is: when should you get help? A DIY approach saves fees and doesn’t require a ton of specialized knowledge, cat-like reflexes, or time invested. The right approach (keeping things simple, following evidence-based best approximations, controlling what you can and letting the market do the rest) can be successful and easy. But it still requires some attention, some decision-making, and some knowledge — and does leave you open for losses if mistakes are made. There will quite likely come a time when some help is needed.

I think a formal, painful process is the way to go. Decide, years in advance while tempers are cool and minds are sharp, what will be the criteria for needing help (family meeting, majority rules? Professional assessment*?). Identify what form that help will take (complete control, advice, double-checking) and who it will come from (relative/friend, professional advisory firm). Perhaps see a lawyer about a conditional power of attorney (IANAL). Yes, it will suck all the fun out of Christmas dinner this year, so maybe combine it with your other painful but necessary family talks that you’ve been putting off (organ donation: take ’em all; life support: trust the EEG and don’t save a vegetable; toilet paper: goes over the top).

While investing seems like the bigger risk — so unfamiliar and rarely encountered — regular monthly bills, credit cards, and chequing accounts can potentially be bigger sources of losses if ignored or mishandled. Systematic withdrawal plans can also simplify and remove execution risk on the investing side (as can automated bill payments on the household management side). Reducing leverage and transitioning to less-active styles are also good ideas (if you used those in the first place).

It’s also a helpful process to go through so you consider what will happen if you die. In that case I think it’s easier** — your non-DIY-investing spouse may need a plan or annuity to help them cope, but at least the situation is a little more cut and dry: you don’t start off arguing about whether or not you’re dead and capable of continuing to manage your affairs, and everyone will know to swoop in and offer to help in that case (and you’ll have a capable executor named to help out, right?).

Not that I’ve actually done any of that with my parents, but I keep meaning to.

* – Note that this is not likely to happen promptly (avoiding the doctor, visiting on a good day, reticence on the part of the clinician to diagnose cognitive impairments)
** – Yes it sounds wrong.