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Common traits of an excellent Rental Tenant

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Finding a good tenant can be a bit like dating. You work your way through interested applicants until you come across someone with decent qualities that you can trust. Only, instead of drinks at the bar and long walks on the beach, you’re searching for someone who likes walk-in closets and a spacious backyard, someone who isn’t going to break your heart or your sink. Don’t let your real estate investments go to waste by renting to bad tenants. Here are a few of the common traits of excellent tenants and what to look for.

By Dan Coconate

Special to Financial Independence Hub

Do you own a rental property that needs the perfect renter? Excellent rental tenants often display the same common traits. And having a superb tenant is one of the most important aspects of property management. It helps ensure a steady income, reduces vacancy rates, and minimizes property damage.

This post will provide valuable insights on how to attract the right type of tenant for your property, highlighting what to look for and how to align yourself with the ideal renter. You’ll learn what characteristics to seek, how to market your property effectively, and the steps needed to build a positive landlord-tenant relationship.

Understand your Ideal Tenant

Identifying the ideal tenant involves recognizing key traits like responsibility and reliability. Responsible tenants pay rent on time, maintain the property, and follow lease agreements. Reliability means they have a stable income and a good rental history. During the screening process, you can identify these traits by asking the right questions and verifying references.

An ideal tenant will also have a good credit score, as this often indicates financial responsibility. You should look for consistent employment history and positive feedback from previous landlords. Personal references can also provide additional insights into their character.

Effective Property Marketing

To attract the right type of tenant, effective property marketing is important. Start by creating targeted property listings that highlight your rental’s unique features and benefits. High-quality photos and detailed descriptions will make your property more appealing. Using social media and professional networks will help you reach a larger audience. Continue Reading…

Simple Interest mistakes

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Image courtesy Pexels: Monstera Production

By Michael J. Wiener

Special to Financial Independence Hub

I’ve heard a few times over the years that one of the disadvantages of making an extra payment against your mortgage, or any other debt, is that saving this way only earns simple interest rather than compound interest.  This is nonsense, as I’ll show with an example.

Flawed Reasoning

The reasoning behind the claim that paying down a mortgage only earns simple interest goes as follows.  Each month, your payment pays all of the interest plus some of the principal.  Therefore, there is no interest accruing on previous interest, so there is no compounding.

This is a tidy little story, but the reasoning doesn’t hold up.

An Example

Suppose you have 20 years left on your 6% mortgage (in Canada where most mortgages use semi-annual compounding). This makes your monthly payment $1780.47. The second column of the table below shows how your mortgage balance would decline over the coming year.

Suppose you decide to pay $10,000 down on your mortgage, but you leave the payments the same. The third column shows your declining mortgage balance for this scenario. The last column shows the difference between these scenarios. This difference shows your returns from your investment in paying down your mortgage.

If your investment earned only simple interest at 6% per year, then the difference would be $10,600 after a year, but it is $10,609.  The extra $9 comes from the semi-annual compounding.  This isn’t much after one year, but after ten years, simple interest gives $16,000, but the real figure if we continued this table is $18,061.  The compounding effect is significant.

Where Does the Flawed Reasoning Go Wrong?

To get the correct answer to questions such as whether paying down your mortgage earns compound interest, we have to treat money as fungible. Consider what happens when your debt accrues new interest. Think of the interest blending evenly with the former debt amount. Then when your payment gets applied, it wipes out proportional amounts of the original debt and the new interest. This leaves some interest with your debt that will accrue compound interest later.

Giving the Flawed Reasoning Another Chance

Let’s consider a simpler example. You borrow $10,000 at 12% (compounded monthly), pay off just the $100 interest each month for a year, and then pay back the $10,000.  So, you paid a total of $1200 in interest. Continue Reading…

Top Canadian Dividend ETFs

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By Mark Seed, myownadvisor

Special to Financial Independence Hub 

What makes a great Exchange Traded Fund (ETF)?

What makes a great Canadian dividend Exchange Traded Fund? 

What are the top Canadian dividend ETFs to own?

You’ve come to the right site and the right post for these answers and my thoughts. Let’s go in this updated post!

Top Canadian Dividend ETFs – what is an ETF?

An ETF (Exchange Traded Fund) is a diverse collection of assets (like a mutual fund) that trades on an exchange (like a stock does).

This makes an ETF a marketable security = it has trading capability. Since you and buy and sell ETFs on an exchange during the day, ETF prices can change throughout the day as they are bought and sold.

ETFs may typically have lower fees than mutual funds (although not always), which can make them an attractive alternative to mutual funds.

Based on my personal experiences approaching 20 years as My Own Advisor I find ETFs very easy to buy using a discount brokerage and ETFs can provide a low-cost way to diversify your portfolio.

Although you don’t need to buy equity ETFs, it is my personal belief that you’re FAR better off owning more equities than bonds over long investing periods.

Simply put: learn to live with stocks for wealth-building. I’m trying to do the same!

What goes into a good ETF? What should you consider?

Before we get into my favourite Canadian dividend ETFs, here are some elements to consider as you select your ETFs for your portfolio:

1. Style – ETFs can track an index, follow an industry sector, be rules-based like some smart-beta funds are, or be much more. For the most part, I prefer plain-vanilla, broad market equity indexed ETFs. While I used to own a few dividend ETFs I no longer invest this way. I’ll link to that post later on. That said, Dividend ETFs can provide income to you as an investor; tangible money to use or reinvest as you please.

2. Fees – Hopefully by now from my site you know that high money management fees kill portfolio values over time. I try and keep my management expense ratio (MER) (the fee paid to the fund’s manager, as well as taxes and other costs) low (for as long as possible). Dividend ETFs often come with higher fees due to portfolio turnover. Something to think about.

Further Reading: Learn about MERs, TERs and more about ETF fees here.

3. Tracking error – In short, tracking error is the difference between the performance of the fund (the ETF) and its benchmark (what it tracks). I would advise you to look at the fund’s prospectus before you buy it and strive to own ETFs with low tracking errors.

4. Diversification – Along the same lines ‘Style’, you should be very mindful of the assets within an ETF before you buy it. ETFs are not created equal.

If you’re just starting out your investing journey, you can learn more about ETFs here.

Top Canadian ETFs vs. Dividend ETFs

When in doubt about buying any individual stock, I’ve been a huge fan of Canadian broad market ETFs like XIU, XIC, ZCN, VCN, along with others over the years.

I like XIU in particular.

XIU holds the largest 60 stocks in Canada and most of those stocks held in XIU pay dividends, although not all of them. Paying a dividend comes down to company policy. There are certainly many ways shareholder value is created.

While XIU has nowhere near the number of holdings that VCN has, XIU has delivered stellar long-term returns better than most.

I referenced this above: diversification can be a great ally as a risk mitigation tactic against stock picking but that doesn’t mean owning an ETF is bulletproof. Indexed ETFs hold all the stock studs and duds. Dividend ETFs might do the same. Dividend ETFs may limit your investing universe and your returns compared to other funds. Things to think about.

5. Tax efficiency – If you never intend to max out your TFSAs, RRSPs, kids’ RESPs, or other registered accounts then this is a non-issue for you. For some investors, however, who invest outside registered accounts (such as the aforementioned RRSPs, RRIFs, TFSAs, RESPs, LIRAs) like I do, then you need to consider the tax efficiency of your ETFs.

XIU in particular is very tax efficient. There are other ETFs to consider for tax efficiency as well.

In taxable accounts, I would advise you to look at the fund’s prospectus before you buy it and strive to own ETFs for your taxable account that are tax efficient; for the dividend tax credit or for capital gains.

Further Reading: How to invest for tax efficiency investing in taxable accounts.

6. History – While past performance is never indicative of future results unfortunately ETF/fund history is all we have since nobody can predict the financial future with any accuracy. Consider the track record of the ETF when it comes to returns.

What are my Top Canadian Dividend ETFs?

All data and information was updated in late-July 2024 and is approximate (for total returns) at the time of this post.

ETF Symbol MER # of holdings Total 5-Year Return Total 10-Year Return
VDY 0.22% 56 61% 100%
ZDV 0.39% 51 46% 67%
XEI 0.22% 75 50% 70%
XIU 0.18% 60 55% 103%
Comparison only: XAW 0.20% 8,700+ stocks 71% N/A – 2015 inception date

I’ve added global ETF XAW for comparison purposes only to the other four (4) Canadian dividend ETFs.  (Dislosure: I own XAW ETF and will continue to do so.)

Why I don’t own any Top Canadian Dividend ETFs…

Readers of this site will know I don’t own any Canadian dividend ETFs. I’ll share those reasons:

While the Vanguard Canadian High Dividend Yield Index ETF (VDY) is a good consideration, I own all the top-10 VDY stocks outright / on my own at the time of this post and have done so for 10+ years in many cases. So, no point in duplicating things …  Also, VDY is heavy on Canadian banks so there is sector concentration risk there I could avoid by owning some individual Canadian stocks. I can also decide to own some lower-yielding and higher=growth stocks inside my taxable account. Continue Reading…

Stock Market Anxiety leads to Bad Investing Decisions. Here’s what to do Instead

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Ignore stock market anxiety and negative stock predictions and instead focus your investing strategy on diversification and portfolio balance

Deposit Photos

The current state of the world is generating stock market anxiety, as it often does. My guess is that the Israel-Hamas war is just getting started and will last a long time. I also suspect that Russian dictator Vladimir Putin had something to do with getting it started, and will do what he can to keep it going. After all, when it comes to running his country, Putin takes a grasping-at-straws approach.

Putin may think that bringing the longstanding Mideast conflict back into the headlines is going to improve his chances of conquering Ukraine and bringing the Soviet Union back from the dead.

He thinks taking a long shot is better than no shot at all. Who knows? He might get lucky.

Early on in his war on Ukraine, Putin seemed to think that Chinese dictator Xi Jinping was going to take pity on him and his country, and offer free money and/or weapons to shore up Russia’s Ukraine invasion. Instead, Xi insists on staying out of the war, while paying discount prices for Russian oil. He takes special care not to let his country get caught up in the economic sanctions that the U.S. and NATO countries and allies are directing against the Russians.

It’s not that Putin is stupid. If a war between Israel and Hamas turns out to be a big drain on the U.S. budget, the U.S. might have less money available to arm Ukraine.

Up till lately, however, Israel has had little to say about Russia’s treatment of Ukraine. Israel may soon take a more active role in helping Ukraine defend itself.

Any war is a terrible thing, and this one is no different. The stock market seems to be creeping upward. Maybe it knows something that Putin hasn’t figured out.

Meanwhile, if your stock portfolio makes sense to you, we advise against selling due to Mideast fears.

Stock market anxiety recedes with investment quality, diversification and portfolio balance

You’ll find that many of your worries concern things that are unlikely to happen; that are already largely discounted in current stock prices; and that probably won’t matter as much as you feared they would.

You get a much better return on time spent if you devote less of it to worrying about high risk investments, and more of it to an investing strategy. Create a strategy that is built upon analyzing the quality and diversification of your investments, and the structure and balance of your portfolio.

There’s another advantage as well. A calm investor is much less likely to react in haste and make sudden decisions that could prove to be damaging in the long run. Continue Reading…

Using Defensive Sector ETFs for the Canadian retirement portfolio

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By Dale Roberts

Special to Financial Independence Hub

In a recent post we saw that the defensive sectors were twice as effective as a balanced portfolio moving through and beyond the great financial crisis. The financial crisis was the bank-failure-inspired recession and market correction of 2008-2009 and beyond. It was the worst correction since the dot com crash of the early 2000’s. Defensive sectors can play the role of bonds (and work in concert with bonds) to provide greater financial stability. With defensive sector ETFs you might be able to build a superior Canadian retirement portfolio.

First off, here’s the original post on the defensive sectors for retirement.

The key defensive sectors are healthcare, consumer staples and utilities.

And a key chart from that post. The defensive sectors were twice as good as the traditional balanced portfolio. The chart represents a retirement funding scenario.

You can check out the original post for ideas for U.S. dollar defensive sector ETFs.

The following is for Canadian dollar accounts. Keep in mind, this is not advice. Consider this post as ‘ideas for consideration’ and part of the retirement portfolio educational process.

The yield is shown as an annual percentage as of mid March, 2023.

80% Equities / 20% Bonds and Cash

Growth sector ETFs

  • 15% VDY 4.6% Canadian High Dividend
  • 15% VGG 1.8% U.S. Dividend Growth

Canadian defensive sector ETFs

  • 15% ZHU 0.5% U.S Healthcare
  • 10% STPL 2.4% Global Consumer Staples
  • 5.0% XST 0.6% Canadian Consumer Staples
  • 10% ZUT 3.7% Canadian Utilities

Inflation fighters