Tag: fixing things

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Real Estate vs Investing Pt 1: The S&P 500 doesn’t complain about pigeon poop

Mrs. CIQY has accused me of being “verbose” before. She’s probably right, but it’s who I am. So I decided to break this post in two, just to keep the length reasonable and palatable. Part 2 is here.

As I said before, i was brought up thinking real estate was king. My parents, because of their experiences, always seemed to use it as a measure of wealth. There were always stories of wealthy past acquaintances of the form of “he was so rich he owned 5 houses!” or “he had enough money to buy apartment BUILDINGS! Not just apartments, but apartment BUILDINGS!” There were also attempts at imparted wisdom in the form of lamentations like “If I had someone to show me the way when I was young and single and earning decent money, someone to tell me to start buying rental properties…” I think the implication was always meant to be that we would be sitting pretty, my parents would have retired early, and my siblings and I would have been proper spoiled, rich kids who could live their lives on easy street, never having known struggle.

I completely understand their thinking. My parents bought their first house in the 1970s. I’m guessing they probably paid something in the neighbourhood of about $15,000-$20,000 for it. (Mind you their mortgage rate on that house was also probably about 15%.) Within a generation the value of that house and others like it had increased about 10x. Meanwhile they also got to take advantage of high wages at the time; wages that have since stagnated in real terms. So if they had saved more, maybe they could have paid their mortgage off much faster and bought a second property to rent, and then a third, etc. etc.

And why not? Being a landlord was easy money, right? Instead of slaving away at a job for 8 hours a day you just showed up once a month to collect rent. Sure, once in a while you had to fix something that broke, but most of the time, ideally things were on autopilot.

At the same time, my parents didn’t know anybody who was rich from investing. Stocks and bonds were things that super wealthy (and usually villainous) people in the movies bought and sold. “Normal” rich people in their experience got that way either through inheritance or property. Or both.

By the time the 1990s rolled around and the masses started migrating online, investing became much easier with online banking and brokerages. My parents started having conversations with friends who actually did dabble in investing and eventually decided that they also wanted to dip their toes in that pool. Other people were making money, so why not them? They were at a stage in life where they felt they maybe had a little money they could afford to use for investment purposes. They signed up for an online brokerage and started buying small amounts of a few stocks.

It did not go well for them. Lesson learned: investing is for idiots. Or very clever people who knew what they were doing and had time to do their research and due diligence. I.e. not them.

This basically confirmed what they already believed, and that was that the best investment is real estate. They don’t say “safe as houses” for nothing.

I am not my parents. My experiences have been a little different. Let me tell you my story…

When I first moved to the city for my current job, I rented. In fact, I rented a furnished apartment that was a five minute walk from work. It was about as turnkey as can be. It was glorious too… I would roll out of bed, shower, have breakfast, and be at work in five minutes. Reliable and traffic proof. But I digress.

After a couple of years, my little studio apartment started to feel… well, little. I wanted more space and I wanted to have my own stuff. After looking at some other rental options, I did some math and figured out that I could actually afford to buy my own place instead. Instead of “throwing away” money on rent, I could “pay myself” by getting a mortgage and building equity. I spent a good amount searching and eventually found myself a condo that was walking distance to work, cheap to maintain, and well within my budget. I was pleased as punch with my purchase.

And then I met the future Mrs. CIQY, and things changed. As I mentioned in a previous post she and I worked and lived in different cities. When it came time to cohabit, we decided to compromise and get a place in the ‘burbs in between where we each used to live. At first, we decided to rent, for a number of reasons. I kept my condo, and rented it out, and we rented a place of our own in the ‘burbs. The rent I was collecting for my condo was the same as the rent we were paying for our new home, so things worked out reasonably okay. The plan was, when it came time to buy a place of our own, we would sell my condo and use the money to buy a house. In the meantime, while we weren’t earning any income on the rental, we were building equity that we could use for our future house. And this is pretty much what happened.

Sounds easy right? Smooth and simple right? Well, it wasn’t.

During the time I was a landlord, I had to fix a broken washing machine. I had to make three separate trips to the rental (which remember, was in a different city) to deal with a faulty heat/ hot water boiler and have it replaced. I had to miss work while I waited for service calls. I had to compensate my tenant who couldn’t have a hot shower in the dead of winter after working outside all day. I had to deal with complaints about pigeon poop. Yes, pigeon poop. And that all happened in less than a year. And that’s not to mention the cost to me to paint the entire place before the tenant even moved in because I was having trouble getting it rented. When it eventually came time to sell the condo, I had to deal with inquiries and concerns about Kitec plumbing, which caused the property to take a lot longer to sell than it should have (btw, do NOT buy a condo with Kitec plumbing).

(I just want to pause for a moment and say that my tenant was actually a very good tenant. He was perfectly reasonable, dependable, and an all around decent guy. I definitely don’t mean to suggest otherwise.)

In addition to all that, it just wasn’t a good investment for me, because the rent I was receiving wasn’t enough to cover the mortgage payments plus taxes and fees. Keeping the condo was costing me money.

Despite all this, we actually did still consider keeping the condo after buying our own place, for the sake of the equity we were getting from it. We thought about the fact that we could potentially raise the rent a bit over time so that renting it was at least covering all its costs. But in the end we decided we would rather use the equity we had built up as a better down payment for our own house, to keep our mortgage payments lower. We figured there were better investment options out there that would give us better return. And the condo had turned out to be more work than we were hoping for.

The S&P 500 does not complain about pigeon poop.

In Part 2, I will highlight some of the benefits I see with investing. Hope to see you there!

 

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The Lost Art of Fixing Things, Vol 1: How to fix a freezer leaking water into the fridge

The key to achieving financial independence is reducing or eliminating any spending that you can practically avoid. Life comes with a lot of expenses that can’t be avoided. We all have to eat, so unless you’re growing or raising all of your own food, you gotta spend money on food. We all have to live someplace, so unless you own your home outright, we all have to spend money on rent or a mortgage. If you have a place to live, you probably want to keep the lights on and the appliances running so unless you have solar panels or wind turbines, we have to spend money on our electricity bill. You get the idea. Some expenses you can’t avoid. But there are a lot of expenses you can avoid.

Sometimes things break. Unless the thing that broke was useless or you decide you can live without it, now you have a situation where an unforeseen expense has arisen. This is what is known by many as “life happening”. So now you have to spend a bunch of money that you weren’t planning on spending to replace or fix your broken thing, right? Well… maybe. Maybe not.

Once upon a time, things were more expensive. And credit was harder to come by. People had to save up to buy things, and those things cost a lot more in relation to one’s salary. So when things broke, replacing them was often not even an option. You had to fix those broken things, or learn to do without them.

Today things are a bit different. A lot of things are so cheap that replacing them is often the more sensible option. My favourite example is printers. When home computers were new, and people generally made less money than today, a printer cost hundreds of dollars. Today you can get a pretty decent printer or all-in-one for about $50. If it breaks, well… Can you mould plastic? Do you have a soldering iron? Do  you have the ability to handle tiny, specialized, electronic components? Do you even know how to fix a circuit board? And if you find someone who can fix it, do you think they’ll charge you less than $50 for their time plus any parts? No, you’ll go out and spend the $50 and get a brand new printer and save yourself some time and hassle. Or you’ll learn to live without a printer.

But there are still a lot of household items or appliances that are expensive enough that you’re not necessarily going to go and just buy a new one when they break. Like a refrigerator, for example. So if your fridge isn’t working properly and you need to fix it, you have two choices: call a repair person, or fix it yourself.

Well it just so happens that after we moved into our new house a couple of years ago, we discovered a problem with our new fridge. Solid ice was forming on the bottom of our freezer, and water was dripping into our fridge, forming little pools on the shelves and generally making a mess.

I consider myself fortunate because I have a dad who is handy. He could build, make and fix all manner of things. And even though as kids we hated it, he insisted on helping whenever possible. His hope was that we might learn a thing or two from the old man. He was right. Us kids gained a lot of knowledge and confidence and the attitude that we too could make or fix things when necessary. Way to go dad! And thank you.

So how do you fix your fridge when you know nothing about fixing fridges? Google! YouTube! I’ll say it yet again: we live in a golden age for access to information. Type your question into your favourite search engine and you’ll get several answers to your question. Then if you like you can go to YouTube and watch a video showing you how it’s done. Or go straight to YouTube if you like. However you like to do your research is up to you. Maybe Google is how you found this page, in which case I’d say my point is well proven. However you got here, I’m going to tell you what I learned and save you a bit of trouble.

The Problem

Moisture has a tendency to build up in freezers, which is why another common problem is when frost starts to form on freezer walls or floors. Food tends to have water in it and through sublimation some of that water can escape as vapour. When the vapour is trapped in your freezer, which is cold, it can turn into ice crystals which is how you get the frost buildup. So to combat this, some freezers have defrosting coils in them, to basically turn that ice into water. These freezers will also have a drain in them to allow the water to drain out, thereby removing the problem. Look at the pic at the top of this post and you will see a small round hole. That’s the drain.

Unfortunately, sometimes the water doesn’t make its way into the hole and out the drain properly but instead will pool nearby and freeze. If more water starts to accumulate, you end up with more ice. Eventually you end up with a sheet of ice completely covering your drain hole and now it can’t drain anything at all. Warmer air from the drain line will even cause some of the ice to drip water into the drain line ever so slowly, and then freeze, like the way an icicle forms. And then you have ice in your drain line completely clogging the works. See that other, larger, square hole in the pic, next to the styrofoam? That hole leads below, to the fridge. Warmer air from the fridge below then causes the ice to melt slowly and drip into the fridge, because it can’t drip into the drain hole that is now frozen over.

The Solution

IMG_5338
My great innovation

The goal is therefore to prevent ice from blocking the drain hole. Look at the pic again. See the copper wire wrapped around the dark tube and then leading into the drain hole? That is what it is doing. The dark tube is the defrosting coil. It heats up. The copper wire conducts the heat from that defrosting coil and gets warm enough that any water nearby won’t freeze, thereby keeping the drain hole open and doing what it’s supposed to do, which is drain water, and keep it out of your fridge. Problem solved forever.

Where do you get the copper wire? I happened to have some lying around from some spare electrical wiring. If you don’t, you can go to your local hardware or building supply store and buy some. You might need to strip your wire to expose the copper, but it should only run you a few bucks or so for more than enough wire.

How to fix, step by step:

  1. Unplug your refrigerator. Empty the contents from your freezer and place them in a cooler. They should be fine, since this whole operation should take you only an hour or two. Likewise you’re probably fine leaving the food in your fridge as long as you keep the door shut through all of this. If you’re really nervous about it go ahead and empty your fridge too, but pesonally I wouldn’t worry as long as you don’t leave it unplugged for more than 3 or 4 hours. Just think of it as a brief power outage.
  2. Using the appropriate screwdriver, remove the cover at the back to expose the coils, and any covers on the floor of your freezer that may be covering the drain hole if necessary.
  3. Using a hairdryer, melt the ice on the bottom of your freezer. Alternatively you can break it, scrape it, chip it, or melt it with warm or hot water. Just get rid of all that ice.
  4. To remove the built up ice in the drain line, you will need hot water and a turkey baster (or eye dropper, or syringe, or anthing else you can use to pick up and squirt hot water). Using your turkey baster, pour hot water onto and into the drain hole until it is clear of ice. You will know when it’s clear because at that point you will hear the water pour down the drain line and into the drain pan. Once you hear that, add a few more loads of hot water just to make sure you have cleared the line of all the ice.
  5. Remove all the excess water out of your freezer using towels or sponges or whatever you like. Make sure you get it all nice and dry.
  6. Get at least 6 inches or 15cm of your copper wire. More is fine too, but I wouldn’t use a length any shorter than that. Insert one end a couple of inches into your drain hole. Wrap the other end around the defrosting coil, as seen in the pic above. It doesn’t have to be super tightly wound, as long as you have one or two good points of contact, to conduct the heat.
  7. Replace all covers, plug fridge back into the electrical outlet, put your food back into the freezer and enjoy.
  8. Take all the money you would have spent on a repair person or new fridge and put it in a savings or investment account, to get you closer to your goal of early retirement.