At home in a rental unit in Forest Hill

Scott Tomenson, the epitome of a successful professional, doesn’t own his home; he rents this 1,100-square-foot, ground floor, two-bedroom apartment in a multiplex with his wife Mary, a real estate agent, and their dog, Bernie, a Burnese mountain dog.

At home in a rental unit in Forest Hill

Scott Tomenson, wearing a business casual uniform of striped dress shirt, navy blue blazer and olive green trousers, is sitting in his beautifully appointed living room looking out the bay windows at his residential street near St. Clair and Yonge. It’s an affluent neighbourhood and Tomenson is at home here.

Formerly employed by investment banks in Toronto and New York as a specialist in risk management and the trading of fixed income products, he established a wealth management practice here in 1999 that focuses on private business owners and their families. Today, he’s in partnership with entrepreneur, author, columnist and former federal MP Garth Turner in Turner Tomenson and Associates Family Wealth Management.

In the dining room down the hall, laptops belonging to Tomenson and his wife, Mary, a residential real estate broker with Bosley Real Estate Ltd., sit across from each other on the table. The kitchen is small but there’s a pantry adjacent to it where Mary and their youngest daughter, Bianca, who is a chef, keep their recipes and supplies for their small catering company, La Cucina Bianca. Out back there’s a terrace and a four-car garage and on summer weekends the couple are often at their cottage on Georgian Bay.

There is only one anomaly: Tomenson, the epitome of a successful professional, doesn’t own his home; he rents this 1,100-square-foot, ground floor, two-bedroom apartment in a multiplex. And he does so by choice.

“I’m a big believer that real estate should be no more than 25 to 40 per cent of your net worth,” says Tomenson. “If you want to talk about risk, it’s having a significant portion of your wealth in real estate, which is not liquid and is subject to boom and bust cycles. It’s important to have a balance in your total financial picture.”

Owning a home is an all-powerful urge in our society. According to RBC’s most recent homeownership study, 91 per cent of Canadians believe a home is a good investment (the highest level in a dozen years) and the number of 18 to 24 year olds who say they are very likely to buy homes doubled to 15 per cent from eight per cent in 2009.

But even Tomenson came to his unconventional wisdom slowly. When he worked in New York, he owned a home on Long Island and upon returning to Toronto in 1995, he bought a big house on Briar Hill in North Toronto. When I ask him whether it was more than 25 to 40 per cent of his net worth, he laughs and says, “Oh yeah. It was more like 70 per cent. But I was learning more and more about wealth management and my wife understood the housing market so, one day, we said to ourselves, ‘we’ve got way too much equity in real estate. Let’s put our house on the market and look for something a bit smaller.’ ”

In the summer of 2001, when they began shopping around in their desired neighbourhood, they saw too many houses going way over the asking price. As Tomenson puts it, “what with Mary understanding the values and me being stingy, we couldn’t find a house.”

Deciding to temporarily rent, they moved the family — which at the time consisted of three teenaged daughters, a dog and several cats — into a large house in the Annex for $4,000 a month. When the landlord decided to sell it a year later, they rented another of his properties near Spadina and St. Clair.

“I have to tell you,” Tomenson says, “right away I loved renting. There are always costs associated with older homes and I’m not handy at all. I loved it that if something had to be fixed or replaced, someone else always came to do it and someone else always paid for it. And property taxes in the city were escalating constantly. So I got acclimatized to having no mortgage, no taxes, no maintenance costs and no worries.”

In April 2008, when the couple’s middle daughter, Sara, moved out to live with her boyfriend, it was time to downsize again. That’s when Tomenson and his wife found their current home at a time when both the main floor and basement apartment were available. The $2,000 a month rent seemed reasonable and they rented the basement one-bedroom, at $800 a month, for their eldest daughter, Miranda, who had returned from McGill to do her Masters at the University of Toronto. (When Miranda left to live with her boyfriend, Bianca moved into the basement unit. When she recently moved out, Tomenson happily gave up the apartment.)

Now Tomenson is giving me a quick-and-dirty lesson in wealth management. “You want a balanced and diversified portfolio. That way, the impact of an economic downturn is lower. When I advise clients, I talk about equity and fixed income classes. For equity, we may have some Canadian stocks and some Canadian real estate investment trusts, some U.S. stocks and some international companies across different sectors and different company sizes. For a fixed income portfolio, it’s government bonds, corporate bonds, inflation index bonds. They’re lower yields but these are quality assets that anchor your portfolio.”

A home, he says, shouldn’t be thought of as an investment. Even if you rent out a basement apartment, it doesn’t come close, for example, to providing the approximately 6 per cent return from investing in the XRE (a Canadian commercial real estate trust fund).

“There’s nothing wrong with home ownership,” he adds. “It’s just that houses are very expensive and people are so obsessed with having one that many pay far more than they can afford. You can overpay on rent, too, of course, but if you rent what you can afford and invest intelligently it can make as much sense as home ownership.”