Station Park | 18, 28, 36, 40, 50 fl | U/C

[jamincan]

It's not quite so cut and dry. This Globe and Mail video goes into a number of factors to consider and how they can affect the balance between home ownership and renting. https://www.youtube.com/watch?v=NZR_vMTLfIk

[MidTowner]

Having "a couple hundred thousand dollars sitting there" is a big cost. I think relatively few homeowners calculate the opportunity cost of their equity (I think many probably don't even understand the concept), but it's a big cost to home ownership and, especially with today's prices, mean renting is the financially better choice than buying.

I say "financially better." Really I think the difference is in some of the factors rangersfan identifies. If you're one half of a childless couple with relatively little inclination to do many home repairs yourself, renting right now is dead obvious. If you have a growing family, unfortunately choices are more limited here, and if you are inclined (or even willing to convince yourself you enjoy) to doing some maintenance yourself, maybe ownership is no longer silly.

It's not straightforward. Anyone who says things like "rent is just throwing money away" or "paying someone else's mortgage" is oversimplifying things by a lot.

[timio]

One of the big factors that pushed us to buy when we did was the ineptitude of the management company running the building we lived in. It shouldn't take a week for them to agree that something is wrong when water continues to pour into the apartment from the bathroom fan.

At least now, it's my fault if it takes that long to resolve an issue like that.

[chutten]

There are some "house things" you can't do if you rent. And there are some "rental things" you get if you don't own a house.

An example "house thing" can be a lawn you can dig up and garden.
An example "rental thing" can be hundreds of thousands of dollabux not locked into an only-moderately-fungible asset

Everyone's personal value functions will weight "house things" and "rental things" at differing levels. From individual to individual, and from day to day, you can say that "owning is better (for my values)" or "renting is better (for my values)" and be just as correct and true as the other.

In short: it depends on the person. And this is just in preference. For this to result in a non-frustrated individual, it must intersect with opportunity. To wit: if there ain't cheap rentals or affordable house-ownership methods in a market you're stuck in, you will be a sad puppy.

That is where this argument has value, _I think_: in arguing how to encourage these opportunities to allow populations of rent-preferers to rent, and own-preferers to own. Also, to create atmospheres that encourage rental authorities (property managers, associates, etc) to be pleasant to renters and owner authorities (city, region, tax, etc) to be pleasant to owners.

[danbrotherston]

I'd also argue that having a lawn you can dig up and garden is not a de facto house thing, I know many landlords who are happy to have their tenants garden. I also know of a few rental buildings that have community gardens next door or nearby.

I think there is more flexibility in the rental market than most people realize.

It's interesting because there are also many parallels with the apartment/condo vs. townhome/detached home freedoms.

I have the latter because I like having a hot tub and gardening, but I'd really rather not maintain a sidewalk (and this year, a roof), and pickup garbage in my yard etc., which is something I could only get with the former apartment/condo.

I think the point I'm getting around too is that it's important to have a variety of housing options to suit individual needs. And we should stop using shame/social pressure/assumptions to imply that one is better than another.

[Canard]

I just can't ever imagine spending twice as much on rent per month compared to what we pay on our mortgage (which will be finished in <10 years, then we live for free) makes any sense, at all. It really seems like it is cut and dry, to me! But I hate money and banks, so this is the only thing we have a "loan" for (pay everything cash, including our cars).

[tomh009]

It's not straightforward. Anyone who says things like "rent is just throwing money away" or "paying someone else's mortgage" is oversimplifying things by a lot.

Exactly.

[Canard]

But it is! It 100% is. Someone buys a condo for $200k. They mortgage it and their payment on the mortgage + condo fees is whatever, $1200/mo. They charge $1500/mo to someone willing to rent it from them, and they make $300/mo on top of now having a $200k condo that is theirs to flip (probably for significantly more) at the end of the mortgage.

How is that not "paying someone else's mortgage"?

[tomh009]

I just can't ever imagine spending twice as much on rent per month compared to what we pay on our mortgage (which will be finished in <10 years, then we live for free) makes any sense, at all. It really seems like it is cut and dry, to me! But I hate money and banks, so this is the only thing we have a "loan" for (pay everything cash, including our cars).

But, really, it's not "for free".  I have done the math, and several friends have done the same, and the annual costs of owning a house (maintenance, landscaping, utilities, property taxes) are substantial.  And if you did NOT own a mortgage-free house and rented instead, you could invest $300K (or whatever) and earn a return on that.

Personal preferences are different.  Yours is ownership, and that's fine.  But renting really can make a lot of financial sense, and a many people do prefer that, even if they could afford to buy.

[tomh009]

But it is! It 100% is. Someone buys a condo for $200k. They mortgage it and their payment on the mortgage + condo fees is whatever, $1200/mo. They charge $1500/mo to someone willing to rent it from them, and they make $300/mo on top of now having a $200k condo that is theirs to flip (probably for significantly more) at the end of the mortgage.

How is that not "paying someone else's mortgage"?

Assuming your numbers are right, you will still have property taxes, let's assume 1.2% so that's $2400/year or $200/month.  You are now almost cash flow neutral.  That's before any maintenance or repairs -- or paying the property management company, or accounting for a lack of tenant.  Meanwhile, you could have invested your down payment and you would be making money on that as well.

Of course, in some buildings the ratio will be more attractive than in others, and there it could make financial sense to buy a unit and rent it out.

[NotStan]

Timing also plays a factor. While owning a home (or a condo) may be better in the long term, sometimes the short term is more important. For example if you are taking a 1 year contract to work or to study, you may not want to bear the short term risk that values will drop. And even if you are, transaction fees associated with purchasing may make that more expensive than renting.

[Rainrider22]

But it is! It 100% is. Someone buys a condo for $200k. They mortgage it and their payment on the mortgage + condo fees is whatever, $1200/mo. They charge $1500/mo to someone willing to rent it from them, and they make $300/mo on top of now having a $200k condo that is theirs to flip (probably for significantly more) at the end of the mortgage.

How is that not "paying someone else's mortgage"?

Assuming your numbers are right, you will still have property taxes, let's assume 1.2% so that's $2400/year or $200/month.  You are now almost cash flow neutral.  That's before any maintenance or repairs -- or paying the property management company, or accounting for a lack of tenant.  Meanwhile, you could have invested your down payment and you would be making money on that as well.

Of course, in some buildings the ratio will be more attractive than in others, and there it could make financial sense to buy a unit and rent it out.

I own a Condo that is rented out.  The cash I take in does not cover all my costs. But, I am building equity and the mortgage is being paid down...  Still a better investment than what my RRSP and other investment portfolios have been giving back the last number of years.   As someone who took the plunge and did it, I have never regretted it.  I am very particular in who I rent too as well. I want my investment protected.  And I don't need issues from the Condo corp...

[MidTowner]

There is a lot of risk inherent to real estate. It’s been going up for so long in Canada (almost a generation) that a lot of people seem to forget it goes down sometimes. The average Canadian moves something like every five or seven years, so there’s appreciable risk of having to sell into a down market (or being bogged down with a very illiquid asset). I think Canadians of working age seriously understate the risk that they will have to move to a different job market (for negative or positive reasons).

Tom, to your point about cash flow, it seems to me that many properties on the market now could not be cash flow positive using any reasonable assumptions. Many landlords are subsidizing their tenants on the speculation that prices will continue to rise.

[Viewfromthe42]

A quick comparison: I rent at Kaufman, for $1580, for 2 bedroom 1 bathroom, all inclusive.

A 2 bedroom 1 bathroom at City Center is listed for $312K.
Its condo fees are listed as $458. I'll assume its electricity is similar to what my previous two bedroom rented non-inclusive condo was, $40. Taxes in kitchener for I see two tax rates I don't understand for kitchener (2.1% and 1.2%), which equal either $546 or $312. With a 5% downpayment, I could perhaps get $1472. 20% downpayment, down to $1308. So the most-in costs (no maintenance of non-condo things) might range from $2,118 up to $2,516, with ownership costing between $538 to $936 more than owning the same property.

Right now, all levels of government are biased towards 100% preservation and growth of the cost of housing, so it's become a safe, higher output investment (which is bad for a whole lot of reasons). But on the flip side, paying what I pay to rent versus to own, I can easily sock four figures a month into investments, of which I've averaged double-digit returns over the past five years. But I have to be responsible enough to save enough to cover not having the forced savings of a mortgage, just as a homeowner can't realize any returns on their home unless they are willing to accept a drastic reduction in lifestyle, moving to very different locations, etc., to unlock their returns (or they're part of the 25% of home sales, based on studies into "foreign buyer" price impacts [they're 5-10%], who are homeowners buying 2nd or beyond properties for investment, driving up the costs of homeownership for everyone else).

[danbrotherston]

What MidTowner says is absolutely correct. How many bankrupt homeowners in the US would have preferred to have been better off renting.

On the other hand, the whole "you're paying someone else's mortgage" argument should not carry any weight. Who cares?! Why do you care what someone else is doing. Why do you care that your housing choices are enriching someone else? Is the name of the game (of life) to prevent others from succeeding? Does that help you in any way? This makes no sense to me. If you prefer to rent, if that's the best option for you financially, for your priorities, for your risk tolerance, then what do you care what anyone else does. If buying is an option for you, and fits your goals, plans, and abilities, then do that. Suggesting that someone should do one or the other, because otherwise someone else owns property should not be convincing. People seem far too concerned with what others are doing or living.