Wednesday, February 24, 2016

The Ins and Outs of Home Swapping

Given that accommodations make up one of the largest components of our travel expenses, we use home swapping as a means to reduce these costs, listing our condo on several home swap websites.  We first dabbled in home swapping while we were still working, but could not take advantage of the full potential of this strategy until we retired and had the flexibility of time and schedule to devote to this.  While we still had work obligations, we were extremely restricted in when and how long we could travel for.  In spite of that, we were still able to arrange a 5 day exchange for an apartment across from Grant Park in Chicago, and a 10 day stay in a quaint flat with a small garden in the Montparnasse district of Paris.

Since retiring, we have taken our home swapping vacations to a whole new level.  We now have both the flexibility to swap any time without interference of work obligations, and we can swap for longer durations.  In 2014, we traveled for 7 weeks around the Loire Valley and the southeast part of France, including five and a half weeks living in a renovated home that was built into a 9th century city wall.  Our 6 week vacation in 2015 included a 2 week exchange for a flat in Amsterdam followed by a 4 week stay in the outskirts of Dublin, which we used as our home base from which we toured both Southern and Northern Ireland.  I blog extensively about our vacations which you can read about or look at more photos at my travel blog

Having successfully completed 5 exchanges with plans for a 6th one this coming spring–an 11 day stay in a Venice apartment with a stunning view overlooking the Lagoona, we feel that we are now seasoned home swappers and can share some of our experiences.

Home Swap Services
There are a growing number of home swap services out there, varying in price, features and depth of customer base. Just about all of them provide the same basic functions including the ability to set up home profiles with photos and descriptions of the home and the owners, a search facility to find potential homes to swap with, and a mechanism to communicate with prospective swap opportunities.  Picking a home swap service seems akin to selecting a dating service–your potential matches are limited by the volume and quality of the candidates in the pool.  And as with most things, you get what you pay for. The higher priced sites try to offer unique features to justify their additional costs. 

Some of the common criteria to look for and compare between various home swap services include:
  • Price
  • Customer Base
    • Number of homes listed
    • Quality of homes listed
    • Number of countries represented
  • Map of the neighbourhood and general location of the home
  • Swappers' reviews and ranking of homes
  • Ranking of members' rate and speed of response to swap requests
  • Search and filter options
    • Location - search by country? province/state/county? city?  neighbourhood within a city? 
    • Number of bedrooms, max number of travelers allowed
    • Type of accommodations - e.g. urban, rural, beach, mountains, vacation property available for non-simultaneous swap
    • Type of exchange - e.g. simultaneous, non-simultaneous, rental, hospitality
    • Kid friendly or not?
    • Pet friendly or not?
    • Smokers allowed or not?
    • Available amenities - e.g. WIFI, air conditioning, garden, balcony, parking
    • Reverse search - who wants to come to my location
  • Specify home availability dates
We first decided to try home swapping by joining a free service called Geenee.  While the price was certainly right, we found that most people who signed up were not serious about swapping and did not even bother to answer a swap request.  At the time that we retired in 2012, Love Home Swap was just getting started and offered a 30 day trial for $1.  We ended up signing up with them and paid between $150-$170 CDN annually for the next 3 years.  In the interim, Love Home Swap was growing through mergers and adding more features.  Unfortunately as a result, their rates also increased dramatically.  When it came time to renew at the end of 2015, we were shocked to find out that the fee for the next year would be $276 USD which came to $367 CDN.  This is more than double the cost of the next most expensive site on our radar, which is Home Exchange at $170 CDN annually. This was also before the value of the Canadian dollar tanked, so the price differential would be even more now. So we are doing some evaluation this year to decide whether we should stay with Love Home Swap (where we have had much success) or switch to one of the less expensive services.

If we do decide to switch, we have come to the conclusion that the best time to sign up for a new home swap service is at the beginning of the year and not at the end.  Experience has taught us that most people do not start thinking about their annual vacations until the start of a new year, so why pay for a membership sooner than this.  Most of the sites offer a free trial period of 2-4 weeks so we may try out a new exchange service prior to officially switching. Another tip is to design your home listing prior to signing up for the paid service or even for the trial period.  You want to have your listed up and available for swaps as soon as possible so as not to waste time on your membership period.  Most sites allow you to browse listings for free, so you can get some ideas of what an effective and appealing home listing looks like.

Our Home Listing
We thought about which details are important to us when we are looking for home swap possibilities and tried to apply them to our own listing.  These included:
  • Plenty of flattering photos of our home, taken from wide angles to show as much of each room as possible.  Highlight potential selling points like a king-sized bed, sunken bathtub, walk-in shower or large outdoor terrace
  • Clearly introducing ourselves including a recent photo and descriptions of who we are, our family composition, what we do professionally and some personal interests
  • Explanation of where our home is relative to tourist attractions and ease of access via walking or transit
  • Dates that our home would be open to offers, available for a non-simultaneous swap (because we are vacationing somewhere else) or definitely not available 
  • After successful swaps, we have asked our swap mates to review our place while we do the same for them.  Good reviews instill confidence with future swappers who are considering our home 
This is a sample of some of the details from our listing on Love Home Swap.
Choosing and Vetting a Potential Swap
When evaluating home swap options, we have learned to confirm the exact location of the home, as opposed to the location advertised in the listing.  Otherwise we might end up in some suburbs far from the core of the city where we actually wanted to be.  This is like saying we are in Toronto when we actually live in Mississauga or Burlington.  We try to choose homes that are within a 25 minute walk or 20 minute transit to the tourist areas that we want to visit, with the transit itself being within a 5 minute walk from the home.

By the same token, when deciding whether to join a home swap service, you need to realistically consider how appealing your location might be to a potential tourist. Generally downtown locations are preferred over suburban ones.  If you do live in the boonies but also own a vacation property such as a lake-side cottage or a ski lodge, that could be a good swap option and would be even easier to get a match, since you could do non-simultaneous trades.

Allowing someone to come stay in your home requires a degree of mutual trust.  I think that there is a greater feeling of responsibility and consideration in a home swap than a rental.  You always remember that while you are in someone's home, they are also in yours and you try to treat their home with the care and respect that you would like them to treat yours.  Some services offer "contracts" that can be filled by both parties.  I doubt that these are legally binding but at least they provide a common understanding of what is expected in the exchange.  Security deposits or trip insurance are also offered for sale by some sites.  So far, we have not found the need to adopt any of these extra measures.

Instead we try to vet swap potentials based on their personal profiles, photos and descriptions of their home, as well as positive swap reviews.  Being on a service that charges a non-nominal fee is itself an effective initial screening criteria. Once we agree on an exchange via email, we try to arrange a video Skype chat with our swap partners.  This gives both parties an extra level of confidence since we can actually talk to each other "face to face", as well as getting a chance to "tour" each others' homes.  By the time we actually swap with the other party, we usually no longer feel like we are interacting with strangers.

It takes time and persistence to find a swap match in terms of desired location and timing. We have received many rejections (or no response) to our requests and have rejected our share of requests as well.  Some tactics that we have used to try to increase our chances of a match include:
  • Sending out requests to multiple potential homes in our desired location
  • Being flexible as to which dates we can swap
  • Performing a "reverse search" to isolate people who have indicated that they want to come to our location
  • Looking for non-simultaneous swap opportunities, especially with listings that are secondary vacation homes
 Preparing Our Home for the Swap
One of the main details to sort out is how we will get and return the home key(s).  It is easy on our end since we live in a condo building with a 7/24 concierge service.  We simply leave with the concierge an envelope addressed to our guests which contains our keys plus a return envelope addressed to me.  On the other end, we have received the keys in multiple ways including having them mailed to us, having a neighbour waiting in the home to let us in, or picking the keys up at the concierge or some other administrative office.  Some of the steps we take each time we prepare for a swap include:
  • Giving our place a thorough cleaning
  • Clearing out space in our closets and dressers for our guests
  • Putting freshly laundered sheets on the bed
  • Leaving freshly laundered towels, new bars of soap, shampoo
  • Clearing our fridge of all perishables
  • Locking up or putting away valuables or breakable items
  • Leaving a welcome gift such as wine, cheese, chocolate, etc.
  • Canceling our newspaper delivery
 Before our first swap, we prepared a "House Book" which explained how appliances and electronics worked, where to find things in our home and around the neighbourhood.  Some of the major components in this book included:
  • Our address, phone number, email contact
  • How to get to our home from the airport (via taxi or transit)
  • Emergency Phone Numbers (doctor, dentist, concierge, neighbours)
  • Services (taxi, car rental, dry cleaner)
  • Neighbourhood (groceries, bank/ATM, restaurants, coffee shops, pharmacies, post office)
  • How things work
    • Appliances (oven, stove, microwave, dishwasher, washer/dryer, vaccuum, etc.)
    • TV, stereo
    • WIFI password/access 
    • Smoke alarm
    • Garbage disposal
    • Fuse box
  • Where to find things
    • extra linens, towels, blankets, place mats, napkins, coasters
    • ironing board, iron
    • hair dryer, bandaids, flashlight, tools
    • kitchen utensils, pots & pans
    • mops, brooms, cleaning supplies
    • sundries: laundry supplies, toilet paper, garbage bags
    • fire extinguisher
    • condiments available for use (spices, sugar, butter, oil, etc.)
  • Requests for our guests to perform minor tasks during their stay like picking up the mail or watering plants
I also created a "Toronto Book" that describes the various places and events that might interest a tourist in Toronto including restaurants, shopping, art galleries, museums, farmers markets, parks, hiking trails, live theatre, sporting events, tourist attractions and annual festivals.  For each attraction or event, I list the hours of operation, costs if any, address and how to walk or use transit to get there from our home.

The house book and Toronto book were a lot of work to set up for our first swap, but once they were done, only minor tweaks have since been needed to keep the information up to date.

Leaving a Home Swap
Before leaving a home swap, we try to give it a good cleaning and tidying including doing all the dishes, tossing any perishables that we had purchased, tossing out the garbage and recycling, stripping the sheets off the bed and putting them into a laundry hamper along with the used towels, and putting new sheets on the bed if they have been provided for us.  The same has been done by the people staying in our home and we occasionally come back to find our place cleaner than when we left it and wondering how they got our floors so shiny?

Home swapping is not for everyone and it comes down to a matter of outlook.  If your first thought is concern that strangers will be in your home, sleeping in your bed and touching your stuff, then home swapping is probably not for you.  If instead you feel this is a chance to save money on travel, make new friends from around the world and have the opportunity to live like locals in a foreign location, then you are well suited for this endeavour.

Saturday, February 6, 2016

Canadian National Railway - A Case Study for Dividend Growth

Following our retirement income generating strategy that I describe in my book Retired At 48 - One Couple's Journey to a Pensionless Retirement, our goal has been to pick solid Canadian companies that are paying a dividend of at least 3% or more at the time of our purchase.  Obviously that yield will rise or fall as the share price decreases or increases respectively, especially if the company does not raise (or lower) its dividend payout.

We made a major exception to this rule when we purchased shares of Canadian National Railway (CNR) in January 2012.   (Note: due to a 2 for 1 stock split that occurred in 4th quarter 2013, all share prices and dividend yields prior to this have been halved so that we can have an apples to apples comparison).  At the time of our purchase, the yield on this stock was around 1.92%, which was below our 3% threshold.  But this was such a solid, blue chip stock in a different industry from our many Financial sector holdings, so we wanted to add it to our portfolio nevertheless.

Looking back at what has happened to our CNR shares entering our fifth year of holding this stock, we can easily see that we have been vindicated with this purchase.  Every year since our purchase, and for many years prior to that, Canadian National Railway has been raising its dividend every January, in time for their first quarter payout in March.  These increases have not been token 1-2% raises like some other companies have offered (just so that they can say they raised their dividend), but good healthy double-digit raises of 15-25%.  Considering that the dividends from our stocks represent our retirement income which replaces the employment income that we used to earn while we were still working, you could say that CNR is one of the best employers that we have ever had.

Since our 2012 purchase, not only has the dividend per share risen steadily, but the share price has risen as well.  As a result, the dividend yield relative to market price has remained more or less the same over the years–hovering between 1.7-2%.  Yet look at the dividend yield relative to our initial purchase price.  By 2015, it had exceeded our old 3% threshold and continues to climb each time CNR raises its dividend again.  The 20% raise in dividend announced January 2016 (despite overall rocky market conditions in 2015) bumps our yield to 3.85% relative to our original purchase price.  And had we had the forethought to buy this stock back in 2009, our relative yield would be almost 7% by now.

Canadian National Railway has turned out to be a perfect buy and hold stock for our portfolio.  It was good that we did not allow ourselves to be turned off by the initial impression of a "low yield", but instead, bought for the long term.  If CNR keeps increasing its dividend at this rate, the sky's the limit for the future.  This is a lesson that we need to keep in mind for any further stock picks.

 We are not even taking into consideration the enormous rise in the value of our stock since we bought it, since the share price has almost doubled over the past four years. Given how the share price is transient and could fall at any time, we don't want to put too much weight on its current value.  Still it is good to know that if we ever were forced to sell these shares, unless the price really tanks, we could make a tidy profit.  Hopefully we never get to that point though, because then we would literally be selling the goose that lays the golden egg.