Tenant for Life by Choice: 5 Steps to “Tenant Freedom”

Many people today feel they have no choice but to be a tenant, however, what if you actually choose this? 

You can choose to be a tenant forever and it can be a great life!

I’m going to introduce you to the concept of “Tenant Freedom,” to show you how great of a life it can be.

Watch my latest YouTube video and listen to my podcast episode to find out:

• The advantages of owning vs. renting your home.
• What you need to buy a home.
• How to be much wealthier as a tenant.
• 5 steps to a great life with Tenant Freedom.
• What is the “Tenant’s RRSP”?
• Do tenants have a Smith Manoeuvre option?
• The growth mindset for Tenant Freedom.

Advantages of Owning a home

Owning a home offers stability and peace of mind, providing autonomy over renovations, decor, and building equity over time. However, the financial barriers to homeownership can be daunting, requiring substantial down payments and high-income qualifications.

• Stability. Peace of mind. Can’t be kicked out.
• You decide about renovations & yard.
• Build equity. Eventually have a paid-off home. (Forced savings).
• Grows in value tax-free.
• Leveraged investment (mortgage for 80%).

Advantages of Being a Tenant

On the flip side, renting offers unparalleled freedom and flexibility. Tenants enjoy the ease of relocation, especially in the era of remote work, and often pay lower monthly expenses compared to homeowners. With no responsibility for maintenance or repairs, tenants can easily pursue career opportunities in different cities without being tethered to a single property.

• Freedom. Easy to move. Live anywhere. (Work from home from anywhere).
• Don’t need to save a huge down payment.
• Lower overall payments. (Rent is usually lower than mortgage. property tax, utilities, condo fees & maintenance).
• Not responsible for maintenance or repairs.
• Easier to take better jobs in other cities. (Studies show tenants get more promotions in other cities).
• Buying a home can be impossible for many.

Challenges of Homeownership

The path to homeownership is laden with financial hurdles, including saving for a sizable down payment and qualifying for a substantial mortgage. With rising real estate costs outpacing income growth, many aspiring homeowners find themselves priced out of the market.

What You Need To Buy A Home

1/ Large down payment.

Should be at least 20%: $150,000-$200,000 or more.

2/ Qualify for a large mortgage.

• Mortgage $500,000-$1 million or more.
• High income to qualify.
• Credit rating.

You Need 5x Average Income To Buy A House!

Average Canadian earns $54,000.

Stats by National Bank & Sean Cooper, personal finance journalist & mortgage broker.

Is Canada Becoming A Nation of Renters?

Introducing “Tenant Freedom“

Tenant freedom is about embracing the choice to rent for life and leveraging it as a wealth-building strategy. By redirecting the funds earmarked for a down payment into diversified stock investments, tenants can potentially outpace the growth of real estate equity.

“Tenant Freedom”

Tenant for life by choice.
Live a great life!

New advantage of Tenants

Tenants can be much wealthier than homeowners!

Real Estate Growth is lower than stock market

Average Annual Growth (since 1975)

Growth

•Real estate (Toronto)    6.4%

•Stocks (Canada)    9.4%

•Stocks (Global)  10.1%

•Stocks (US)  11.0%

For growth investors, real estate is dead equity.

5 Steps To Tenant Freedom

1/ Save the 20% down you for a home, but invest it in stocks.

In 25 years, have 1.5 or 2 times the equity of a paid-off home.

2/ Rent for less than the total cost of owing a home.

• Rent usually less than mortgage, property taxes, utilities, condo fees & maintenance.
• Rent condo for $500-$1,000/month less than owning.

3/ Freedom. Rent wherever you want.

• Rent the home you would want to buy.
• Close to work. No commute.
• Amenities.
• Close to entertainment.
• Close to family or friends.

4/ Financial independence/Retire early (FIRE).

Retirement nest egg far larger than homeowners.

5/ Tenant Freedom growth outlook.

• Have a growth mindset.
• Open to better jobs in other cities.
• Work from home in fun cities.
• Retire anywhere – Low tax country or vacation destinations.

Other Issues

• Many people feel you should buy a home.
• Solid way to build wealth.
• Tenant Freedom: You can have much higher wealth.
• Home is forced savings & forced discipline.
• With Tenant Freedom, you need your own discipline.
• Homeowners have leveraged growth.
• 20% down & 80% mortgage is 4:1 leverage.
• Tenant Freedom: Can do a 3:1 investment loan.
• Many tenants feel powerless against landlords.
• Tenant Freedom: You have money. You have the power!

Tenant Investment Strategies

Tenants can utilize investment vehicles like the “Tenants RRSP” (FHSA) to accumulate wealth tax-efficiently. Additionally, tenants can explore leveraging investment loans to amplify their portfolio growth, akin to the homeowners’ Smith Manoeuvre.

Where to invest your “Down Payment” portfolio?

1/ “Tenants RRSP” = FHSA

• FHSA: First Home Savings Account.
• Designed to save for down payment.
• For tenants: $40,000 free RRSP room for life.
• $40,000 tax-deductible contributions then move to RRSP
• $40,000 RRSP room that homeowners do not get.
• FHSA is perfect for tenants for life.

2/ RRSP Home Buyer’s Plan (HBP)

• Borrow from RRSP for down payment.
• For tenants: Leave in grow in your RRSP.

3/ TFSA. Tax-free Tenant Freedom.

Can’t homeowners use their dead equity?

Growth investors have higher growth strategies: for homeowners or tenants.

Yes. Homeowners can do effective strategies like Smith Manoeuvre.

• Use their dead equity to grow more wealth.
• Convert mortgage to tax-deductible credit line over time.
• Great wealth-building strategy:
• For the right people done the right way over the long term.

Tenant Freedom – Tenants can also use leverage to grow larger wealth over time.

• Use your lower monthly payments for an investment loan.
• Or have investments pay interest.
• Or pay tax-deductible interest yourself as a super RRSP alternative.
• Up to 3:1 investment loan. Triple your “down payment” portfolio.
• Tenant Freedom 3:1 loan. Great wealth-building strategy:
• For the right people done the right way over the long term.

Embracing a Growth Mindset

A growth mindset is pivotal for long-term financial success. By thinking long-term, having a financial plan, and embracing risk tolerance, tenants can navigate market fluctuations and capitalize on buying opportunities.

What People with a Growth Mindset Do

1/ Think long-term.

2/ Have a Financial Plan. Live on purpose.

3/ Learn the skill of a higher risk tolerance.

4/ High equity allocation. Usually 100% equities.

5/ Consider leverage.

• Great wealth-building strategies. Not for everyone.

6/ All market declines are buying opportunities.

7/ Faith. Patience. Discipline.

Choosing to be a tenant for life by choice unlocks a world of financial possibilities and lifestyle flexibility.

By reframing renting as a strategic decision rather than a compromise, individuals can embark on a path to tenant freedom—a life enriched by financial abundance and personal autonomy.

Ed