Renting Property

It's been over a month now since we moved into our new house. The condo we lived in previously is listed on the market. I bought the apartment style condo when I was a single guy because of the location and the 1100 sq ft meant it was big enough for a small family for the future. It's located two blocks from a future train/transit stop, and only one block away from grocery stores, drugstores, a liquor store, all five major Canadian banks AND a Tim Hortons! Since it's situated in such a convenient location and it's fairly large, the thought of renting it had crossed my mind. I thought of all the great tax breaks that are available for rental properties and the sound of the cash register started to chime. Then I heard the record scratch ...Vrrrp. Reality set in and I remember why I don't want to be a landlord; dealing with renters.

I can hear the cries of fallacy from Vancouver and Toronto already so please hear me out first. Any time I talk to people who have rental properties in Edmonton, the only complaint they have is finding good tenants. Yes there are many good tenants out there, they just seem to all be renting a place already. For the sake of simplicity in this post, I will refer to good renters as tenants and bad renters as...well, just plain renters. Tenants pay the rent on time, clean up after themselves and treat their rented dwelling as their home. Renters pay when they have the money, clean when the landlord is coming and treat their dwelling like a rented automobile ( Don't act like you've never bagged on a rental car before, everyone does it!).

Tenants do exist but they are indeed a rare commodity. Even if you do find a good renter it's only a matter of time before they move out again. You could find yourself without a tenant during slow housing markets and have an empty property and no income. Finding a good tenant is only one part of the rental property experience.

The Bad

 Landlords supply shelter, and the tenants pay a sum of money in compensation, but what happens if they have a renter and they don't pay? Or what happens if a renter breaches the tenancy agreement by damaging property or performing illegal activities? The landlord has to give written notices which the renter has the right to counter with their own written notices and then both parties must have the courts involved. Sounds like a very long and expensive process to me.

With property ownership comes maintenance, upkeep, insurance, property taxes, legal counsel and liability. You could pay a property management company to look after your rental property but it does take a big chunk out of your income. There is a lot of work to rental property and whoever calls it "passive income" has never had to get a furnace changed on a Sunday night on the coldest day of the year with tenants that have a baby...yikes! There may be a lot of negative points to renting property, but there are some good ones too.

The Good

If a landlord does find an excellent tenant who pays the rent on time, and takes care of the place, then having a rental property is a goldmine. The rent covers all the expenses and either pays the mortgage for the property or might just be money in the bank. If a landlord has more than one rental property, they might have enough rental income coming in to be self sufficient and not have to work. Their days could be spent golfing or perhaps take part in that mixed martial arts class they've always wanted to try.

Once you have a rental property, there are some very nice tax breaks that go with it. Any insurance, property tax, condo fees or utilities are tax deductible. Cha-ching. I also found out that any upkeep maintenance and labor performed by a contractor are tax deductible as well. Cha-ching. And unlike in the U.S, interest from a mortgage is not tax deductible in Canada...unless it's a rental property! CHA-CHING! Rental income is taxed at your current income level, but with all the tax breaks you get, you'll be getting a huge refund from the government.

As time goes by, the value of a rental property will also be increasing depending on the housing market of course. Unless you buy property in a swamp or close to a nuclear reactor the value will always go up. As the equity in your property goes up, the more credit you will have to buy more rental properties and thus slowly build up a rental empire and become a true lord of the land.

Will I ever be a landlord? Maybe, but the ratio of tenants to renters is a scary thought. What would you do in my situation?

Friday Dividend List Edition

Well it's Friday and another roller coaster of a trading week has passed. Any gains have been neutralized by violence that erupted half way around the world. Saputo on the other hand is the only company I have seen who recalls products and their stock price keeps moving up like a freight train. I have my eye on BMO as it is inching it's way closer to it's 52 week low and Royal Bank seems to be the underdog of the big 5 banks in 2010. It's been a proven strategy to buy the underdogs of the banks each year because they have no place to go but up.

I apologize for the lack of updates, but since I started working 6 days a week my free time is very limited. I had to re-vamp a few posts I had planned to publish, but I should have one ready by the end of the weekend.
5:30 AM sure comes quickly on the weekends.... Have a good one!

CNR Keeps On Chugging

I found out today that CN's Board of Directors has approved a 20 per cent increase in the Company's quarterly cash dividend. "A quarterly dividend of thirty-two and one-half cents (C$0.325) per common share will be paid on March 31, 2011, to shareholders of record at the close of business on March 10, 2011."

CN has increased its cash dividend for 15 consecutive years since its initial public offering back in 1995. Although it would be a great stock to own, CNR is close to it's 52 week high and even with a20% increase it's yielding close to 1.91%. CN is a solid company and if there's another dip coming, I would love to pick up some shares closer to $50.

Do any of you own CNR?

Dividend List Jan 21, 2011

Here is the new dividend list as promised!

The list has changed a bit since the last update so here are the details:

• Stocks listed with a blue highlight have had dividend increases since January 2010
• Any yields over 4% are highlighted in green
• I've added 52 week highs and lows to show opportune times to buy
• List will be updated every Friday

I know many of you are wondering how I arrived at my choices for this list. I've chosen 23 stocks that I feel are good dividend growth stocks that have a history of dividend increases. Yes, majority of the banks have yet to increase dividends since 2008-2009 , but investing in Canadian banks is always a sure bet. I know all the Tim Horton zombies are wondering why it's not there and I chose not to include it until it has a bit of dividend growth history. I left out a few good stocks like TransCanada, Telus and Manulife because of the mortal sin they have committed, "Dividendem Slashticus". Perhaps after a few more years of dividend increases and a few rosaries they will be added. I am still skeptical of converted income trusts as their dividends are very unstable. With time and a history of dividend increases, some new corporations might be added.

Hope everyone has a good weekend!

Reflection and 2010 Dividend Report

Well my journey of dividend investing was off to a good start in 2010. I made some mistakes and strayed from my strategy, but I learned my lesson and recovered fairly well for a novice investor. I now have a concrete strategy and I am determined to stick with it.

I am very passionate about dividend investing and I created this blog to share my knowledge with family and friends so that they could see how easy and effective self investing can be. The Loonie Bin has been a great medium for sharing my passion for dividend investing with others and I am very happy with how it has turned out. I am not a professional writer nor am I an accredited adviser. There are thousands upon thousands of financial blogs on the Internet and I have no intention of trying to compete with any of them. I will never have annoying ads or linked words because it's annoying and it makes finding the information in a blog very difficult. I have a small following and I'm very content with having a small following. The only payment I receive from this blog is the satisfaction of helping others learn about dividend investing. With that being said, I have deviated from my initial approach of adding humor to my posts to set me apart from the thousands and thousands of other investing blogs and in future posts I hope to remedy this. Yes, there are way better blogs out there, but somehow you ended up here. Lucky you!

Anyways, on to the good stuff.

After transferring and selling my existing mutual funds in the first quarter of 2010, I purchased quite a few shares of dividend paying companies from across the board. My total dividends from the second quarter worked out to be $2500 per year. After pooling the dividends with contributions through the rest of the year, my dividends total for Jan 2011 is now $3038. I am very happy with the progress of my dividend income and can't wait to see what 2011 will bring.

I will be posting my updated stock list this Friday with a few more companies and some added features that should help take the guess work out of choosing the right companies to invest in.

To my dozens and dozens of readers:   What are your total dividends going into 2011?

Shaw Dividend Increase

CALGARY, ALBERTA--(Marketwire - Jan. 13, 2011) - Shaw Communications Inc. ("Shaw") (TSX:SJR.B) (NYSE:SJR) announced today that its Board of Directors has increased the equivalent annual dividend rate to $0.92 on Shaw's Class B Non-Voting Participating Shares and $0.9175 on Shaw's Class A Participating Shares. This represents an increase of 5% or $0.04 per share. Shaw's dividends are declared and paid on a monthly basis and this increase will commence March 30, 2011.

After a cold, miserable day it's nice to come home to some great news. After great debate whether Shaw would have the capital to increase their dividend after the purchase of Canwest AND their attempt to enter into the cell phone market, Shaw came shining through to patient investors. I am a Shaw Customer and subscribe to all three services of TV, Internet and Telephone.

I purchased SJR.B last year at $20.04 per share and my yield has increased from 4.39% to 4.57%. Not a huge leap, but a 5% dividend increase is healthy sign Shaw is on the ball and it's dividend growth history is on track. To those of you who own Shaw, here's to being one dividend increase closer to financial freedom. Cheers!

It's TFSA time!

I remember when tax free savings accounts were announced a few years ago. I thought to myself that it would be a great way to save money and not pay any tax on the interest I earned. Like most Canadians, I was oblivious the true potential that a TFSA could offer a smart investor. I remember I was offered an interest rate of 2.5% and within 6 months that rate dropped to below 1%.

Now that I have become "Financially Aware", I invest my money in dividend paying stocks with a tax free trading account. By investing in stocks with proven dividend growth, my return will grow each year with each dividend increase. Last year my return was 3.5% and after a dividend increase last month, my return is now 4%.

On January 3rd I called my online broker and told them to transfer $5000 worth of BCE stock from my cash account to my tax free trading account. The amount of dividends that accumulated in my TFSA last year was $340. With my new contribution for 2011 my dividend total will be $575. It doesn't matter how much the value of the stock goes down, I will still make $575 in dividend income.

I could take that money out at any time, but instead I'm going to re-invest it to buy more shares which will in turn pay me even more dividends. By contributing the maximum amount each year and re-investing the dividends, I will be able to turn a small amount of money into a nice chuck of retirement change thanks to the power of compounding; transforming my TFSA into a compounding dividend machine. If I need money for any reason I can withdraw the dividend income tax free, and not have to touch the principle investment. The longer I leave the dividends to be re-invested, the more money will be available the following year. In 20 years, I will have a growing tax-free income to possibly help pay for a child's education or allow me an early retirement. The possibilities are endless.


 I know not everyone can afford to make the maximum contribution of $5000 each year, but it's a good idea to save as much as possible to utilize the potential of this amazing investing opportunity.

Time To Get Financially Fit

A new year is upon us and while everyone makes New Year's resolutions to start exercising or stop smoking, no one seems to worry about their financial fitness. Becoming financially fit doesn't take a lot of work like most people think and with the advent of computers and the Internet it's even easier. Most banks have automatic withdrawals so people with absolutely no sense of financial control can save for a rainy day.

I'm amazed how so many people are apathetic when it comes to their finances. For the most part, I blame easy access to credit. Don't have enough money to make it through the month? Just charge it! People seem to think credit is the answer to everything, and the worst part is they don't seem to mind paying 19-30% in interest charges either. As long as they pay the $20 minimum on their $2000 balance, the creditors are kept happy and card holder is content paying up to four times the original purchase in interest. To me, that is ludicrous but sadly it's becoming common practice.

What's even worse is the attitude we have towards retirement. Why save my money for tomorrow when I can spend it today? Inflation increases on average 4% each year, and the amount it takes to retire comfortably is growing at an alarming rate. Just wait till the baby boomers start retiring in the next few years and how the lapse in the amount of taxpayers and the increase of health care demands are going to have a major impact on the economy.

So how does one become financially fit? I've created a list of just a few steps people can take to whip their finances into shape.

Step # 1: Choose To Change

Like any regiment, you must have the determination to succeed or you will never change your ways. Becoming financially aware is a life changing ordeal. I wish I had a crystal ball to show people that in 30 years it's going to take over a million dollars to retire comfortably and scare them into shape; but I don't and they are going to find out the hard way.

Step #2: Pay Off Consumer Debt

Pay off your credit cards! You're only hurting yourself with criminal interest charges. If you pay off your balance each month, you can use your credit card as an interest free loan for 6 weeks and really stick it to the man when you use their money and not pay them any interest.

Step #3: Live Within Your Means

Stop spending more then you make! Make a budget, pay off your bills, proceed to step #4 and then allocate any extra money on the frivolous things in life. "If you live by the label, you die by the receipt!™"

Step #4: Save Your Money

There's nothing more reassuring then seeing a positive balance in your account after the bills are paid. There is a definite high that one feels and I for one have felt it, and after getting married my wife said she started to feel it as well. Having a safety net protecting you from life's worries will not only cut down on one's stress level, but I guarantee it will help you get a better nights sleep.

 Step #5 Retirement Happens

Have a plan for the future. I hate working and I know I'm not alone. Pensions are a rare commodity these days and if your retirement plan only consists of relying on CCP, you are going to be homeless and hungry.

The company I work for has an RRSP matching program where they match up to $1.50 an hour in RRSP contributions after 3 months of employment. I started as soon as I could and have been doing so for over the last 10 years. I've talked to many co-workers who have been with the company for years and haven't started contributing because they say they can't afford to do it. One co-worker said he had worked for the company for 4 years and never even considered signing up for the RRSP matching program. I did a reasonable calculation of how much money a person would have in retirement savings after 4 years of contributing to the plan.

40 hours a week x 52 weeks per year = 2080 hours
1 Week of Holidays = 40 hours

11 Stat Holidays = 88 hours

Misc time off = 52 hours
Total amount of workable hours = 1900 hours x $1.50 = $2850
Employer Contribution = $2850
Total Amount of RRSP Contribution in one year: $2850+ $2850 = $5700
Total Amount of RRSP Contributions after 4 years = 4 x $5700 = $22,800


I wish I had a video to show how far his jaw dropped after I told him he missed out on over $20,000. That's not even considering how much more he could have had if it was properly invested!

If your employer has any kind of contribution matching program you'd be a fool not to enroll in it. Your return  is a guaranteed 100% without even investing the money!


Becoming financially fit is a state of mind. If you're happy paying thousands of dollars in interest, then you best not make any attempt at it. Most of my readers are already financially fit, so I hope they can pass on their knowledge and help others become "Financially Aware".

Here's to a happy and financially healthy new year!