Full Disclosure Finance

By Justin

Naked (uncovered ) puts are a useful way to earn some money with low risk if you intend to purchase the stock anyway and don’t need to get in immediately.

You are “naked” when you sell a put (the put guarantees you will buy X shares on contract at the strike price if exercised) without a corresponding short position in the stock.

This scenario is exposed to “risk” because if the stock drops below the strike price and the option is exercised you will be forced to buy the stock. Therefore you would have to lay out capital on a stock that has decreased in price and could be a dog.  If the company has a catastrophe you would be stuck with shares that may never recover. 

But what if you want to buy the stock anyway?  Then being forced to buy at a lower price might not be a “risk” after all.

So here’s the deal:

If you’ve found a stock you want to buy at its current price and have done all of your homework, consider selling a front month naked put at an out of the money strike price.

You will have the premium deposited into your account and you have essentially agreed to purchase the shares at the strike price if the option is exercised.

You already have the desire to buy the shares and wouldn’t mind getting them a little cheaper.

Most major Canadian discount brokers will not let you trade uncovered.  After looking around, TD Waterhouse and ETRADE are your best bets for the discount brokers.

Here is an example:

You like the proposed infrastructure spending that the US has pledged to undertake.  Steel will be a significant component of the spending and commodity prices might be poised for a rebound next year.  So you’re thinking Nucor Corp (NUE), Andrew provided an overview back when they were really booming,  which is currently trading at $39.19 with a 52 week high of around $83 and a low of $25.

The March $37.50 put has a price of $2.50. 

1)You sell 5 puts (Total Potential Purchase of 500 shares x $37.50 = $18750 if exercised) and pay associated commissions (ETRADE will be a max of $19.95 per order plus $1.75 per contract) of $28.74.

2)$1250 is deposited to your account (500 shares x $2.50)

3) Waiting game begins. Do your best not to check Yahoo Finance every 5 minutes.

4a)It is getting close to March 20 and the stock price has stayed steady around $40. The option will not be exercised and you keep your premium. 

4b)The stock drops to $35 and you are required to buy 500 shares at $37.50 on or around March 20.  Keep in mind that you have collected $2.50 per share in premiums and paid $37.50. So unless you spent the $1200 on a gold-plated iPhone, your cost basis is $35.  You have then bought the shares at market price after an 11% drop in the stock price over a month.  If you bought before the drop you are now down 11%.

5a)Repeat the next month until you get exercised and keep the premiums while you wait.

5b)Hold the stock as per your bullish take on steel and infrastructure and you have now bought Nucor for $35 when you were ready to buy at $39.19.

There’s no time like now to find some great stocks you wouldn’t mind buying for below current levels.  Consider naked puts as a way to get into those positions when Mr. Market permits and be paid to wait in the process.

Risks are present, but if you like a stock and are ready to buy at current levels, go naked and sit around for a while instead!

By Justin

So by now everyone is asking how they can open a TFSA and every financial institution is loving the attention. However, there are some important things to note before opening up your account.  

• Some banks charge fees for account transactions while others do not 
• It is more than just a “Savings” account
• Know the rules regarding deposit and withdrawal
• Know the tax benefits to assist in the RSP / TFSA debate

In my previous post I discussed the greatness of the TFSA but lacked the operational details because it was only March 2008.Now that the banks are unveiling the full set of info, its time to dive in.

1. Fees

The major banks are offering these accounts with varying fee structures. The fees consist of an annual administration charge because of the record keeping and such required for reporting purposes. Withdrawal fees are triggered when you withdraw money from the account.

For GIC’s, Savings Accounts, and Mutual Fund activity only major banks will not charge you for administration or withdrawal. In fact TD Canada Trust branches are the only ones that have a free withdrawal limit (1 per month, $5 per withdrawal after that). TD Mutual Funds do not have a withdrawal limit however.

For Stocks and activity requiring use of a brokerage (full service or discount) at the major banks the fee structure changes for the worse.

No Fees at all:RBC Direct Investing, Scotia McLeod Direct Investing, and HSBC Invest Direct.

Some Fees:BMO InvestorLine is a discount brokerage and charges a withdrawal fee of $25 per transaction and an admin fee of $50.  The admin fee is waived for the first year of an account and/or if you have over $100,000 in assets with BMO.BMO Nesbitt Burns is a full service entity and has an annual admin fee of $50 and a $15 withdrawal fee. TD Waterhouse has a $50 annual admin fee, waived if you have over $100,000 in total assets. You can also eliminate fees at TD if you use the electronic statement option for your billing.

Verdict: Watch out for the fee structures especially if you don’t bank at a major institution.  These admin fees are equal to 1% of the annual contribution limit, which is kicking you while you’re down if you’re also invested in mutual funds (and paying MERs). Ask about the fees and if you’re not happy go somewhere else.  It is easy to open up the accounts and transfer money, so this is no time for loyalty in the face of high fees!

2. Investment Options 

The name Tax Free Savings Account is being taken too literally.  Looking at CIBC offering the wonders of a “Tax Advantage Savings Account” with “a guaranteed high interest rate tax free” sounds like a dream doesn’t it! The truth is that banks are pushing high interest savings accounts and GIC’s really hard for the TFSA accounts (can’t blame them because they’re attractive in today’s market).  Some offer different accounts altogether depending on what you want. However, you can invest in the same things as your RSP. Tim Cestnick, who writes for the Globe, offers a great outline of the more specific ones outside of funds, bonds, and stocks. For instance, you can hold options, shorts, and private company shares (this one is detailed further by Tim).  The highest taxed forms of investment income are a sure bet to go into your TFSA. These include interest generating investments, foreign dividends, and options and shorts whose gains may be treated as regular income. 

3. Deposit and Withdrawal  

It looks like you can deposit up to $5000 per year, yeah, “we knew that already”. But many banks are offering a monthly contribution plan, so it appears that you can contribute at any frequency until you reach the $5000.

Withdrawal is the same.  You can withdraw money at any time. Money taken out of your TFSA frees up that amount of “room” so it can be put back in later. 

Example: You deposit $5000 on Jan 15, 2009.  You withdraw $1000 in Dec, 2009.  You now have $1000 of cap room you can use in 2010 on top of the $5000 annual limit.  So you would now be able to put $6000 in during 2010.

4. Tax benefits

 This is a critical factor.  The decision of RSP / TFSA, if you have to decide, comes down to what you predict your income tax rate will be upon retirement.  Because your RSP money is taxed at retirement age, it is most advantageous to contribute now if you think your annual income will be lower than your current level.

If you expect your annual income to be higher than current levels, the TFSA offers an advantage. You would be giving up the tax benefit of the RSP now and putting the money into your TFSA.  Upon retirement, you could withdraw from the TFSA tax free and at a higher marginal tax rate this represents substantial savings.  In this situation, if you had your money in an RSP, the annual withdrawal would be taxed at the full marginal rate.

In the event that you can maximize both TFSA and RSP contributions, by all means.

If you’re unsure about your future tax situation, it might be best to straddle the line and put a similar amount in your TFSA and RSP. Tim Cestnick provides a similar, yet more detailed, analysis.

Overall, the TFSA presents a new investment opportunity with substantial benefits.  Just make sure you ask a few questions before you open one.

By Justin

I have put together a series of posts on the Rent versus Buy decision that many people face, especially in times of softening property markets.

I have found a useful tool on Yahoo Finance that lists key variables and will allow you to calculate the value of buying.  Be sure to account for all expenses like cable and other utilities that you pay for when owning.

Check out my posts for some qualitative information and then use the calculator to assist in the process.

Part 1, Part 2, and Part 3 are currently available.

Hope this helps you make a more informed decision.

by Justin

Well, I must admit that I’ve not been making adequate time for FDF lately as a combination of travel and settling in from a move are my best excuses.  A ton has happened since I was last writing about Real Estate comparisons and getting into detail regarding a few stocks.

Most recently, I had an article in the pipeline on Labrador Iron Ore (LIF.UN) because a major expansion of the Iron Ore Company of Canada (of which LIF owns 15.1%) was announced in September.  The USD exchange rate was also turning in their favour amounting to a great buying opportunity at $45 a share.  During the process of researching and analyzing future cash flows for LIF, iron ore prices promptly shrunk with the commodity slide.

Now trading at $19.32 as of Dec 9 they don’t seem like such a great deal in the short term as IOC has just announced major scalebacks in production which will hamper distributions.

With the new information, I have to do more investigation into the potential of ore prices to recover (some say by 2010 when China gets back on track) because there is a lot of guessing going on.

I do think there are some great long term buys out there and will be looking to sniff some out over the next quarter.

I am also interested in the direction of the real estate market, especially in Southwestern Ontario.  Data keeps suggesting that sales are down and we are moving into a buyer’s market.  I have been looking at some properties in Waterloo that are cheaper than ever and have excellent cap rates (near 8.5%).  Given the direction of interest rates as well, this could be a great time to go shopping.

The wonders of Small Claims Court have been taking up a chunk of time also.  After a terrible group of tenants, I have a substantial amount in damages that need to be recovered.  I find this process both intimidating and chock full of learning opportunities. I will be keeping you posted on the process to give some insight and so you can learn from my experience.

Andrew has also been a busy man over the last 4 months and is taking in the entertainment (aka volatility) of the markets like most of us.

So bottom line, we’re back and ready to go. Look for continued writing on our activities and the lessons that can be had!

By Justin

I am enjoying this format because it provides information on real estate markets not readily available (see Part 1 for the skinny). There is currently no free source out there green-lighting certain areas of Canada or the US. You could join the Real Estate Investment Network to get hot tips about where to buy in Canada, among many other useful things I’m sure, or just use these fundamentals and analyze markets that interest you. If the same analytical approach taken to equities was applied to real estate we would have a wealth of analysis available for the public. They could use it to guide their home purchases and increase the market’s efficiency.

Until something comes along, I’ll be stuck doing my own investigations.

I wanted to do another Canada / US comparison because some people might have thought I cherry picked New Haven to prove a point. Actually, I picked it because it is an area of interest.

I’d like to look at the fundamentals of 2 more cross border markets. I have decided to look at Cambridge, MA and Calgary, AB. Calgary was the hottest market in Canada for a while, but is now cooling off. I’m curious to see how the fundamentals look during this cooling process.

Cambridge, MA is a great area to spend time in. Being home to 2 of the best educational institutions in the world doesn’t hurt. I visit every summer but haven’t the foggiest what the real estate market is like.

Here’s a quick overview of the guiding factors in my analysis.

Take time to look at published information and data from trusted sources when looking to buy in an area. For Canadians, the CMHC, Royal Lepage, and individual city’s sites offer quality stuff.

In addition to getting good data, you also need to know which data is critical for understanding an area’s potential to support a strong real estate market. Taken from pg 39 of Don Campbell’s book Real Estate Investing in Canada, the 12 key fundamentals that affect real estate values are:

Passive Factors (out of your control):

1. Mortgage Interest Rates

2. Increase in Average Incomes

3. Increased In-migration and Demand

4. The Ripple Effect

5. Local, Regional, and Provincial (State) Political Climate

6. Transportation Expansion

7. Areas in Transition

Active Factors (in your control):

8. Creating Highest and Best Use

9. Buy Wholesale, Sell Retail

10. Quality Marketing

11. Renovations and Sweat Equity

12. Speculation

We’ll be looking at the passive factors because they do not depend on a specific property and you have no influence over them. You need to make sure factors out of your control will support your purchase.

Factors 4-7 require a little more digging and insight than the first 3. The ripple effect concerns positive effects on prices in one market after a nearby town or city has experienced a “boom”. Canadians should think of Milton, being the ripple effect of Mississauga and Oakville, which were ripple effects of Toronto at one point.

The political climate concerns the area government’s ability to conceive, support, and implement development initiatives that bring people and capital to it. Some areas clearly excel in this regard. Waterloo Region is consistently viewed as a winner in this department. The City of Brantford, however, usually falls down on the implementation side and would get a lower rating.

Transportation Expansion concerns the construction of new highways that cut commute times to the big cities. Public transit improvements also have a positive effect on property prices, especially when they are within 500m of a new station or line. Vancouver (actually the GVR) is a great example of this. REIN has a great report to give you more details.

Areas in transition are often difficult to define. The word “gentrification” comes to mind. It could be an old rundown urban area that has recently seen more families move in. They buy old houses and either fix them up or tear down and build shiny new ones. This activity encourages restaurants, bars, and grocery stores to move in, bringing more people now that the area has amenities. In short an area in transition is clearly on its way, but not quite there, to becoming a great place to live.

So let’s look at Calgary, AB. It’s the heart of Alberta’s oil kingdom and the oil boom has created a huge growth in employment. The number of people moving there from all over Canada is staggering, so one can understand why property prices went a little nuts. Let’s see what the numbers say:

I was able to get population and income data from the City of Calgary.

The total population increase over this 5 year period was 12.5%. This is almost twice the Canadian average for the same period.

For the City of Cambridge, MA the population trend has been slightly upward at 2.1% growth from 2000-2007.

Advantage: Calgary

Now looking at average income growth for Calgary, we would expect to see the same growth trend.

From 2002-2006, growth has been solid from $73000 to $90700, representing a change of 24% before inflation.

Cambridge, MA doesn’t have a great deal of charts available, so I’ve pieced together the data. Median Household Income growth before inflation from 1999-2007 was 19%. This is very good relative to other cities I have looked at.

Both cities clearly have solid income growth, yet only Calgary has had above average population growth.

Let’s now look at property prices and see if these fundamentals are echoed.

Calgary Median House Prices

As you can see, prices have gone crazy in the past 4 years. Growth in property prices from 2000-2007 was approximately 161%!!! This will be hard to match in any environment and prices have seen a cooling, not a collapse, since their peak in 2007. I’m not sure if the population growth (though above average) and income growth completely justify such an increase, so it will be interesting to watch over the next 2-3 years.

Cambridge, MA has not had close to the same price performance of Calgary (very few places have!). Yahoo Real Estate provides data from 1999-2007 that shows an 85% increase in the median house price. This is a very good performance over an 8 year period but only half as much as Calgary.

Growth has also slowed in the last 18 months and prices are actually showing a slight decrease.

In comparison then, the price performance in both markets has been excellent. Calgary has a substantial advantage on the fundamentals because of the high population growth it has experienced. In income growth, both areas have shown above average performance.

Neither market has seen price decreases of 10-20%, rather it has been a slower cooling after the “boom” which is also a positive sign of the areas as a whole.

And the winner is……Calgary, by a substantial margin because of the population growth figure that will serve to support the real estate market well into the future. Cambridge is simply not growing as fast despite rising incomes and an 85% increase in prices over the last 8 years.

So there you are, a specific analysis of the fundamentals for two real estate markets allowed us to understand their behaviour. Go ahead and apply these fundamentals to other US cities. If the cities have great fundamentals and prices are still dropping it may be a great time to buy. Just be sure to do your homework!

By Andrew

I’ve decided to start a new segment of posts on the site called “On the Radar”. When I come across a stock that catches my interest i’ll outline the story in post form so you can see my justification for why I like the stock. This will help me perform thorough research on my stock picks and hopefully give you some ideas in the process. The first stock in the segment is Nucor Corp. (NUE).

Nucor is a steel company operating in the United States with customers across North America. Last year Nucor produced 22 million tons of steel and steel products, including hot-rolled steel, cold-rolled steel, metal buildings and steel joists. It is also North America’s largest recycler of scrap metal. Nucor controls about 20% of the US market and about 60% of sales are to the construction industry with automotive making up another large portion. The U.S. steel stocks have been on fire lately as a decline in finished steel imports to the United States has increased demand for locally manufactured steel. The weak dollar, high shipping rates, and strong overseas demand has kept imports from reaching American shores. This limits the supply locally which forces U.S. steel companies to run at full production capacity and allows them to raise spot prices on steel. As long as demand remains strong these companies should continue to have great pricing power. According to the International Iron and Steel Institute global production remains below historic trends and likely will lag global consumption, despite rapidly rising steel prices.

Nucor is up 20% over the past year but has underperformed compared to competitors U.S. Steel (up 55%) and AK Steel (up 100%). Nucor is only 8 points off its 52 week high and is cheap on a valuation basis trading at 15x trailing earnings and 10.4x forward compared to U.S. Steel at nearly 25x trailing and AK Steel at 18.5x trailing. Nucor recently increased guidance for its second quarter earnings due to strong shipments and higher margins. The company now expects Q2 earnings in the range of $1.75 to $1.80 per share compared to their previous forcast of $1.55 to $1.60 per share and well above consensus analyst estimates of $1.69 per share. That represents an increase of nearly 54% over Q2 2007 on the low end of the estimate. This bullish outlook likely means that analyst estimates for the full year are on the low end meaning Nucor is undervalued and has significant room to the upside. The earnings increase even reflects the dilution of outstanding shares of more than 3% due to Nucor’s common stock offering of 27.7 million shares that closed on May 29th, 2008. On the news shares of NUE jumped nearly 9% to $80.54 but pulled back all the way to $74 and currently sits at $75.50 per share. I’ve been watching this one for a while and I jumped on the opportunity to buy in on the pullback below $75 per share. I expect global demand to remain strong through 2008 and into 2009 and Nucor should perform exceptionally well in this environment.

A key component Nucor’s long term growth strategy includes pursuing strategic acquisitions of downstream steel products. Execution of this strategy has resulted in annual capacity more than doubling over the past year to 4 million tons. Recent acquisitions include Verco in steel decking, Harris Steel Group in rebar fabrication, cold finished bars, & metal grating, LMP Steel in cold finished bars, Magnatrax in metal buildings, and Nelson Wire in wire mesh. Continuing this strategy Nucor announced last week the acquisition of Ambassador Steel, one of the largest independent fabricators and distributors of rebar in the United States. With its strong growth strategy Nucor should continue to increase its footprint in the U.S. steel market.

I think this is a great stock with great potential over the next two years. I think you can get into this one anywhere near $75 per share with a lot of room to the upside.

(Disclosure: Long Nucor)

It’s been a while since we have posted any articles on this site. Needless to say things have been a bit busy and unfortunately the site has been put on the back burner. There are a few posts in the hopper which should be up in the next couple of days. Sorry for the lack of content…Stay tuned.

By Andrew,

Lately I have been trying to implement the deep-in-the-money calls options strategy that I explain in a recent post through my paper trading account at Investopedia. On April 22nd I outlined our first success with Microsoft calls and a second idea with Corning Inc. With the stock trading at $25.73 I bought 10 of the August $20 calls for a premium of $5.91 per share for a total capital investment of $5910. Sometime last week the premium on the calls hit our target of $6.91 per share and the position was sold for a gain of $1000. Good for 17% in less than two weeks. The move was thanks to a solid earnings report by Corning where both earnings and revenue saw strong double digit growth. In addition, guidance was raised for the upcoming quarter and full year. In the same time-span the stock price increased approximately 5%, again illustrating the leverage of options.

In a comment on the previous post Jeff from Blue Moat illustrated a potential downfall of this strategy. Essentially his point was, the strategy is great when it works but if you pick a bad stock you can end up down 95%. The leverage of options is great when it works for you but when it goes the other way it can translate into serious losses. One way to get around this may be to put in a stop loss order after the calls are purchased. In the same way we limit our gains to $1000 we can limit our losses to $1000 as well. As long as you are smart about your stock picks you should be able to stay on the winning end of the trade the majority of the time. Stay tuned for more potential stock ideas for this strategy.

By Andrew,

Jeff McLarty from the financial blog Blue Moat was nice enough to write a post on his site answering some of my options related questions that have come about regarding some of the recent posts on this site. Anyone interested in understanding the nitty gritty of options trading should check it out. He explains in depth the terminology and fundamentals behind both sides of an options trade (puts and calls), as well as the possible scenarios at expiration. Also, if you’ve never visited his site before you should give it a read. Its one of this sites that I visit regularly. He’s a fellow Waterloo alum, so you know that he’s good people.

One specific question that I had was related to the covered calls strategy that I wrote about recently. My understanding was that the only way to exit the contract was to let the options expire (ideally worthless so you keep your shares and the premium). However, Jeff left a comment on the post saying that another way to exit the trade is to buy the calls back. As the calls near expiration the options become less valuable and, as a result, the premium will decrease in value (this illustrate the time value of options). Therefore, your profit will be the difference between the premium you collected and the premium you pay to buy back the calls. Typically he buys the calls back when they are very close to worthless. Why risk losing the potential upside in the stock for an extra $0.05 per share. He almost always sells the front one or two months, usually one or two strikes out of the money. Of course there is the risk of losing your shares with this strategy but the idea is to sell the calls at local peaks where, if the stock does hit the strike you wouldn’t mind taking the profit and selling your shares anyway. Plus you are pulling in the premium every month that options expire worthless. The ideal stock for this strategy would be a slow moving stallwart that trades in a well defined range so you can easily identify the sell points (the local peaks).

Thanks again to Jeff from Blue Moat for sharing his expertise with us and answering some of my questions.

By Justin

Here is the continuation of my quest to produce a systematic tool for identifying if you should buy or rent. Keep in mind that when you combine these insights with some diligent research, you should feel confident in making a decision.

The previous post discussed your Plans for Savings and % Down Payment as key indicators. Below is the complete list.

Key Variables affecting the Rent vs. Buy decision:
• Level of Financial Education
• Plan for Savings
• % Down Payment
• Property Market
• Stock Market
• Nature of Income
• Location

4. Property Market
If you consider the purchase of your home to be an investment, it would be wise to investigate the current status of the market for such an investment. In case you’ve been living in a bubble for the past year (actually, you couldn’t because it burst a while ago…..), you’ll know that the US Real Estate Market is tanking. This is a macro trend that doesn’t apply to all areas however. Certain markets in the US are still strong due to good fundamentals. See my post outlining the fundamentals.
Buy or Rent? Let’s account for the status of the property market before making our decision. A large assumption in our calculations is an annual rate of increase in house prices for your area. After researching historical performance, it is important to calculate the average annual increase for the last 5,10, and 25 years.

Combine this with a sustainability check. If you’re seeing rates over 20%, your market is bound to see come cooling in the near future (gradual or otherwise).

If you’re seeing high rates that are not likely to continue, renting might be a good option until you’re able to understand what form the cooling will take.

However, if prices are crawling at 2-4% a year and the area has good fundamentals, buying now is probably a better choice than renting. Either you might see more rapid price increases in the future or continued steady increase. Both are great conditions to be a homeowner in.

In the event your market is experiencing a long decrease there will clearly be some reasons behind it. Examine the fundamentals, and if they look really bad, prices may not reverse themselves in your lifetime! Renting would then be the way to go. In this case, make sure you get your Financial IQ up because you won’t be able to make your money from a primary residence.

In the event that your area has been depressed for a while, but could be on the “up and up” in terms of community development and steady population increases, you may be getting in a little ahead of a boom. Make sure you review the fundamentals thoroughly to ensure things are as good as they appear. Buying in an improving area is every homeowner’s gravy train, so this would clearly be a green light special.

In short, if the fundamentals in your area look strong and price increases have stayed reasonable (0-12%), buying is a good choice, all other factors being equal.

If the fundamentals look bad or your market has been really hot (Hello Saskatoon, or Calgary 2 years ago) with increases well over 20% for 3-4 years straight, find a good rental and wait for things to cool down.

Keep in mind that you should perform a forward looking cash flow and balance sheet analysis for the next 5 years to make sure that your favored option does indeed work out better.

Again, if you’re going to rent, you need to keep piling the savings into investments to truly realize any advantage calculated. Buying cars and trips with the cash will provide no lasting value to your balance sheet.

On a scale from 1-5, give yourself a 1 if the Market in your area is stable or “coming around” with solid fundamentals. You would score a 5 if your area is getting more like a ghost town all the time (bad fundamentals).

5. Stock Market
The other key assumption going into a Rent vs. Buy decision analysis is an expected rate of return on money invested. Your ability to generate a decent return will, along with all the other factors, be critical if you choose to rent. When renting, areas for growing your money are generally equities / funds / derivatives, starting a business, and buying an income property. I suspect most people would favour the first area because it seems easier (just click “BUY” and you’re good to go).

With relevance to the big decision, volatile markets or those that are clearly unstable require a high financial IQ to navigate. Obtaining the required return outlined in Part 1 of this series would therefore be difficult. This means that buying a house would be easier to handle and to count on a stable return.

In times of low volatility or sustained growth, it might be possible to achieve some steady, solid returns. This may give the illusion that renting is the way to go even for those with low Financial IQ. However, keep in mind the required rate of return to match the BUY scenario outlined in Part 1.

Give yourself a 1 in this category if the Stock Market is extremely volatile or going sky-high. A score of 5 would correspond to a market that is just out of a recession and has encouraging fundamentals to drive future growth (see: CHA CHING!). I think currently we’d be around a 3, because we are clearly in the middle of a recession, but there are plenty of good buying opportunities.

The Property and Stock Markets are going to have a large influence on your decision because they are the source of your 2 biggest assumptions in the balance sheet calculations. Your cash flow analysis will not really be affected by these variables as an increase in the value of your home or stock will not put cash in your pocket. Now if you plan to buy an investment with some type of payout (dividend or income trust distribution) be sure to include it in your cash flow analysis.

We’re moving along in the decision making process and I’m sure most of us already have an idea of whether Renting or Buying would be best.

We’ll finish up the analysis next time when we total the points up and look at the Nature of Income and Location.