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Thread: To Buy or To Rent?

  1. #1
    CaLoonie costybex's Avatar
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    My fiancee and I have been struggling with the decision to purchase a house.

    In our opinion, houses are overpriced (disclosure: We live in the Durham region).
    The question we get asked more often is "are you looking to purchase a home?"
    we hem and haw, and respond with "no just renting right now".
    Most people look at us sideways and see home ownership as an investment.
    Our investments are with a financial advisor. Unlike owning a home, a stock portfolio pays you.

    This article was sent to me today by my in-laws.. maybe we ARE on the right track. I feel more inspired then ever to continue renting and investing. Don't get me wrong, I don't think we are going to become millionaires anytime soon, but the idea of having the option to retire younger, enjoy life, and have your stock portfolio pay your yearly income intrigues me.

    anyone interested in the idea of renting and investing instead of having a mortgage (debt!) check out this site
    http://www.millennial-revolution.com/about-us/
    This thread is currently associated with: N/A
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    Smart Canuck Purdee's Avatar
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    the last article i read on this subject was pretty interesting, you can check it out here
    http://business.financialpost.com/pe...ford-to-buy-it
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    CaLoonie costybex's Avatar
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    Quote Originally Posted by Purdee View Post
    the last article i read on this subject was pretty interesting, you can check it out here
    http://business.financialpost.com/pe...ford-to-buy-it
    Thanks for posting this Purdee- this is a great article !
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    Smart Canuck
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    Not sure how many suckers are left, but the Canadian housing bubble has to burst sooner or later...

    I've been saying that for awhile and have obviously been wrong, but I refuse to get suckered in and in the meantime have been enjoying semi-retirement I started at age 35 and traveling the world the past 7 years.

    To each their own....
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    Smart Canuck
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    It all depends on your situation. While owning a home is nice, the mortgage, maintenance and repairs can get very expensive. If you love to travel than renting is a better option in my opinion. House prices these days are crazy!
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    The other side of the coin- Renting. As much as you may want to stay put for life. You don't get to decide that. Your landlord may decide to sell and can give you notice to move. Moving is expensive.

    If you have kids that means you may have to move in a different school district which I wouldn't want to do to my kids.

    Rent is high everywhere it seems and not many rentals available I am hearing. Which is hard for someone looking.

    If you buy the right house at the right time it can be the better option for people.
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    CaLoonie costybex's Avatar
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    Very good point. Moving and changing school districts would be expensive and could cause difficulty.
    Renting can be a high cost as well!

    I'm not against buying, for the right house at the right price.

    Quote Originally Posted by Frugalbigmama View Post
    The other side of the coin- Renting. As much as you may want to stay put for life. You don't get to decide that. Your landlord may decide to sell and can give you notice to move. Moving is expensive.

    If you have kids that means you may have to move in a different school district which I wouldn't want to do to my kids.

    Rent is high everywhere it seems and not many rentals available I am hearing. Which is hard for someone looking.

    If you buy the right house at the right time it can be the better option for people.
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    tightwad and proud of it! brunt's Avatar
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    Full disclosure - I own a house, but that does not change my opinions.

    Good for you for asking! There is more bad advice given in this area than probably any other financial area.

    I think that every single couple should be required to do a full and accurate accounting of the costs of buying and carrying versus the costs of renting. Always, always, always know what your likely expenses are going in. And count them all - land transfer tax (double in Toronto), condo fees (don't forget special assessments), property tax, mortgage interest, CMHC premiums, maintenance, repairs, upgrades, house insurance, garbage pickup, water fees, lawn maintenance, driveway clearing, lawyer fees for buying and selling, real estate commission, and so on. If any analysis does not include each and every one of these, then you haven't done a good enough job.

    And only after you have done this can you make a true comparison.

    And don't forget the hidden costs of owning. If you are young, and especially without children, your employment prospects are greatly enhanced by keeping yourself mobile. While I was renting, I could, on very short notice have told my employer that yes, I would take a promotion and move. This would require giving my landlord two weeks notice, and giving him a handshake right before we drove off with the moving truck. I have taken a job when I owned a house, and lived six months apart from my wife as we tried to sell the old house. Not a fun time.

    One argument that is always made for ownership is price appreciation. Well, yes, prices have increased. But prices will increase as interest rates decrease (lower interest rates make a fixed payment per month service a bigger mortgage). This is pretty well Econ 101. And interest rates have been falling pretty well non-stop for over 30 years now - from over 20% to the now sub 3%. This means 30 years of price appreciation due to this, and only this fact. Interest rates are not going to go much further down, so this aspect of past appreciation will not continue.

    One other point here. It is simply not sustainable to have an average house price that the average family cannot afford. Therefore, it will change by incomes going up, or house prices coming down. And precisely what do you think are the odds of large increases in average incomes?

    Much of the advice from people is merely stating what worked for them. Sure, if your parents bought a house 30 years ago, they made out like absolute bandits. But suggesting buying in favour of renting based on this simple fact is like suggesting that someone buy a lottery ticket with last week's numbers, because they won last week!

    Yes, there are emotional benefits to owning. But, to get back to my previous point of doing the renting versus owning analysis, it is crucial to know how much you are paying for these benefits. As I mentioned, I own. But I knew precisely how much that this was costing me, and we could afford it, and we decided that it was worth it (mostly because we did not need a mortgage).

    In short, do your own analysis and stick by your own conclusions. You will never please everyone all the time. But be darned sure to please yourselves by knowing that you are doing the best thing in your own situation.

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    There's pros and cons on both sides of the argument; singles and couples can benefit from renting as small apartments tend to be cheaper than a mortgage and with more mobile choice as career locations fluctuate, but once you start wanting space and/or stability I have generally found that renting that 3-4 bedroom house with a yard tends to far outstrip just buying the damn thing ($3000 rent vs $1700 mortgage), as well as the security of not being ousted as soon as your lease is up because the landlord wants to increase the rent yet again.

    Location is also a huge factor in the decision - for anyone but millionaires buying in large city-centers like TO or Vancouver is just a non-starter, especially when rentals are comparatively cheap and plentiful; compare it to a rural area where rentals may be few, far between and of low quality, but the real estate market may be reasonable and you can find a nice house with mortgage, taxes, and maintenance costs at or below rental cost. Or in cities where the rental vacancy rate is >0.1% and the landlords know this and jack up their prices....

    There's a lot of assumptions that renting is cheaper than buying, and that if you invest the difference then you're coming out ahead. In some places, this is sage advice but it isn't universal. I've moved to three different cities (in Ontario, but not TO) in the past five years, tried both renting and purchasing, and in each location renting was more expensive than buying (including the realtor fees, lawyer fees, taxes, interest, maintenance, etc.) So, financially for us, buying makes more sense...and still planning to retire early, travel frequently, etc.

    Additionally, and most importantly, it fits my desired lifestyle better than a rental - I want to be secure in where I live, I want to customize the space I live in (and goddammit, no more 80s-style parquet floors or galley kitchens), I want to build and grow a garden, and I want to have enough space to host family events or holiday weekends or expand my own family. The emotional part of the decision (which is, in my opinion, at least as if not more important than the $ value equation) makes it incredibly difficult for anyone to objectively say "doing X is better than doing Y".


    Basically, "you do you".
    Last edited by Wandress433; Tue, Aug 16th, 2016 at 11:15 AM.

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    momof5boys
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    There are previous renters in our community that are literally camping because they have no place to go. The rental was sold from under them and there are virtually no homes for rent in our area at the moment. For me owning is peace of mind, especially with a family.
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    Some people are house rich and cash poor. They spend their youth in trying to pay off the mortgage, barely enjoying life and when they are old they have a paid of house to show for it, but their youth is gone. Ultimately the kids get it as inheritance.

    Lot of such folks in Toronto - GTA and Vancouver- GVR . I would say besides these 2 cities, home ownership still makes sense in rest of Canada.
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    A friend of mine bought a condo as he couldn't afford a house in GTA. He doesn't even like a condo, but he is treating the condo as if he is renting a apartment. For almost the same price as an apartment rental his 20 year mortgage on the condo is i.e monthly mortgage, property taxes, utilities.
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    There's also a cultural aspect as well..

    Mr P and I are of a generation where owning a house was the desired social norm to the extent that Mrs Thatcher's government encouraged the sale of council owned properties to long term tenants while forbidding the building of further local council homes.
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    Smart Canuck mulock's Avatar
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    When I bought my house in 2013 in Halifax, I didn't make the decision on a whim. I saved, saved, saved and then put down a 38% down-payment. I view my home as a bank.....paying my monthly mortgage knowing I am actually paying for something physical (an asset), whereas by renting I was simply paying my landlord's mortgage. A lot of my friends also own their homes (on a mortgage) and rent out rooms in their houses to pay off the mortgage faster.
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    Frosh Canuck EvilTofu's Avatar
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    Read this article http://www.moneysense.ca/spend/real-...ent-right-now/

    For Toronto and Vancouver, the math is for renting. But I think it has to do with your personalities and situation.

    Buying Pros:
    Some people would waste the savings difference on stupid things, so the monthly mortgage payment work as a forced saving mechanism.
    Psychological benefits. Feeling "adult".

    Buying Cons:
    When you buy, you are going to spend money to paint and renovate, make it your own... this can all add up. Don't kid yourself that it is all "investment". Renovation never pays unless it is done months before selling and in a professional staging manner.
    Money for repairs. Appliances only last for 7-15 years.
    Might be far from work. Potential long commute.

    Renting Pros:
    You can move closer to work whenever you change your job.
    When you rent, you don't worry about appliance breaking.
    Renting is also flexible for your work. You can pack up and go anytime you want for better career. When I see someone who hates his job, totally complacent, telling me proudly that he just bought a house, I think to myself, "Dude, you just trapped yourself. This is the best job you can do? This is your career? How sad..."

    Renting Cons:
    Have to move when landlord decides to sell.
    Your relatives look down on you, "You're still renting?"


    Don't listen to people about how it was best decision that they buy their house XX years ago. They can't see the future, no one can. As a sufferer of a housing bubble (in Hong Kong), my parents has lost everything at the time that people thought houses would keep going up. They have never recovered. If you do choose to buy, take a mortgage that is no more than 3 years' worth of your combined annual salary. Don't borrow the max amount the bank is willing to give you.

    As an architect, I advice people to buy happiness. It really annoys me that houses are nothing more than financial vehicles. People don't build homes they love, they renovate for market value. Of course, you should think twice before painting your house lime green but you should think more about what makes you happy.

    One thing about happiness is for SURE. No one likes commuting. You'd get used to the beautiful house, but you will never get used to long commute. Your happiness goes off the cliff when your commute is more than 30 minutes. Try to keep it under 20 to give it a buffer for snowstorm. People who buy often end up with very long commute in order to maximize income (in the city) while buying the largest home they can afford (in suburbs). It is a happiness and marriage killer.

    I bought my condo 15 years ago. It was to shut my relatives up about not being adult enough. Money-wise it was foolish. I would have gotten so much more from the stock market. (I feel that working class people tend to benefit more from a monthly mortgage?) It has also limited my job options. The worst part is that due to this housing bubble, many of my neighbors have gone on to buying other properties and renting their units at low prices. I end up living in a building full of people who are several tax brackets below. They don't give a damn about keeping the building nice. They are only here for a year or 2. My hallway often smells like weed, stairwell smells like urine. I envy my friends who rent. You know a 1B1D on 40th floor at Aura is only $1400 a month, comes with free gym membership at Hard Candy!
    Last edited by EvilTofu; Mon, Nov 28th, 2016 at 09:22 PM.
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