Does it make more cents to rent or buy?

[lenny]

Ever feel like renting is a waste of money, as in flushing it down the toilet?

"What Does the Future Hold?

"How much home prices, rents and stock prices change can have a large impact on your outcome. Unfortunately, these are some of the hardest things to predict. If you choose to rent instead of buying, the calculator assumes that you’ll spend your would-be down payment on stocks or another investment."

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0&abt=0002&abg=1

"Rent or Buy? The Math Is Changing"

"....Is It Better to Rent or Buy?

"The choice between buying a home and renting one is among the biggest financial decisions that many adults make."

http://www.nytimes.com/2014/05/22/upshot/rent-or-buy-the-math-is-changing.html?abt=0002&abg=1

 

[overdone]

Does it make more cents to rent or buy?

If you rent, I'd pile all the leftover cash into hooked on phonics

 

[sybian]

If you take the average 50 year old,...that bought in the late 80's in say Abbotsford.
He or They would have bought an empty lot in above average neighborhood for about 40 or 50 thousand.
Then build a 1700 sq. ft. house...with a grand total..depending on variables for 140 to 160 thousand.
That house now, not including the cost of keeping it up thru the years is about 500 to 550 thousand.
If a twenty year old bought that same house now....in 25 years it would have to be worth over 2 million to make the same profits.
I own a very large piece of Ranchland...and profit, with hard work ,from my investment because I produce hay and beef. So my situation is different.
If you rent ,your paying someone elses mortage.......But have almost no obligations other than paying the rent.
I do find it rather disturbing with the amount of land in B.C.....How expensive, even in the North Country it has become. The price of land , food, even obtaining water and services is so far out of reach now for most people.

 

[Sonny]

Not all market areas in the Lower Mainland find appreciation in all forms of property ownership.
Condos in particular are more subject to value swings than houses or townhouses.

Friends bought an apartment in White Rock three years ago in a good building. Today, if they sold, they would lose at least $30,000.
Their monthly outflow includes monthly maintenance, mortgage interest and property taxes. An amortized loss added to that would be an expensive three years.
If they had rented, they would have seen less cash flow out, with the bonus of taking their down payment and investing it for some kind of return.

Other friends in Richmond moved from one apartment strata to another, but could not sell the first for what they bought it four years earlier.
Rather than take a loss, they rented out the first apartment, but with lots of headaches with tenants continually breaking leases and damaging the apartment.
The rent is covering their carrying costs on the first apartment but they would rather sell and invest the cash elsewhere, but not sell at a big loss. Trapped.
Of course, their new second apartment also is not saleable today for what they bought it either.

Just because Vancouver, Burnaby and Coquitlam are cooking, does not mean real estate is a good investment everywhere, or all types of property.
All the banks' economic forecasters are calling for a "correction" or "soft landing" in the hotter real estate markets in Canada.
That, if combined with an eventual interest rate hike, would be cause for a lot of major homeowner headaches.

Real estate used to be a sure thing for every generation. Now, not so sure.
Real wages have not increased in North America but have fallen, except for the wealthy. The cost of living has risen.
Where's the money to sustain a buoyant real estate market? The off-shore sources will eventually tap out.

 

[Fullhouse]

If you rent, I'd pile all the leftover cash into hooked on phonics

I rent, and I plow all my left over cash into 'hooked on hookers'...:thumb:

BTW, is the OP talking about cents (pennies), or sense ---- when he says: "Does it make more cents to rent or buy?..

 

[manni]

I rent, and I plow all my left over cash into 'hooked on hookers'...:thumb:

BTW, is the OP talking about cents (pennies), or sense ---- when he says: "Does it make more cents to rent or buy?..

I'm guessing it's the latter.
a clever play on word from a clever guy perhaps?

 

[Ray]

Calculate your monthly housing expenses. One can calculate whether it makes more sense to buy or rent.
My mortgage is less than it would be to rent the same place. So I bought.

 

[Five-Guns-West]

Look at price index of condos, townhouses and detached homes.
I looked last March/April and saw data for the last 20 years.

20 years ago, all three rose by about the same percentage, with homes leading the others by a difference of maybe 5%. Condos and townhouses were equal.

10 years ago, condos started to lag behind townhouses, and townhouses were lagging behind homes.

Last March/April, condos had a -1 to +1% change over the previous 5 years, townhouses +1 to +2%, and detached homes from between +5% to +15%.

My take on this data:

- don't buy a condo unless you always plan on living in one forever because when you sell it, unless you have extra savings you won't be able to buy anything else but a condo. If you're set on living in a condo, rent one for even the equity in the condo is not useful for anything except maybe a more favourable loan for a car (unless of course the car manufacturer has a much better interest rate, which is likely), or some other miscellaneous self-loan.

- if you buy a townhouse, you might one day be able to buy a detached home - but chances are, when you do decide to buy a detached home, after the sale of the townhouse you're guaranteed to have to move far away to where detached homes are much lower in value than in the lower mainland.

- if you buy a detached house, focus on the value of the property (ie: location and size) rather than the house itself. Almost all (ie: 75 to 95%) of the overall value is in the property and not the house.

8 years ago I sold my condo and made $40k after paying off the sales expenses, taxes, legal fees, etc, and bought a crappy bungalow house 2 blocks east of North Road. It was a mid 70's house in need of repair. Early last year I sold that house and made almost $400k net of sales expenses, taxes, and legal fees - after putting my house up for sale for 3 months. I bought a house built in 2001 near Burke Mountain with a terrific view and a nice property and still had $50k left over in the bank. A couple of blocks away are these new townhouses for the so-called "upward professionals", they look fancy and they fetch for about $800k - they look nice, but totally overvalued and the typical buyer of these things are suckers in my opinion. I mention them because in my opinion, they are helping to crowd the area, make land more precious, and boost the value of my property. My estimate of my home is that in 10 years, if I sold it I should make from between $600k (to be conservative) to as much as about $800k.

I don't foresee China being anything but the economic engine for the world for the next 20 years, with Chinese investment preferring Canadian real estate and financial instruments over American ones. That's the main reason for my optimism in the next 10 years with my current purchase.

 

[Vman]

Renting is fine if you can't afford to own. I could buy a place of my own right now if I wanted to but I prefer to just rent for the time being, because I am still young and although my career is great right now, it's a career that allows me to move to other metropolitan areas in the future. I don't foresee myself living in Vancouver for the rest of my life, which is why I choose to rent. Unless you're absolutely sure you want to invest and be in Vancouver for long term then I say go for it, but be careful where you plan on purchasing, my brother in law purchased a condo in langley and is now having the hardest time selling it without loosing $$

 

[UhOh]

If you take the average 50 year old,...that bought in the late 80's in say Abbotsford.
He or They would have bought an empty lot in above average neighborhood for about 40 or 50 thousand.
Then build a 1700 sq. ft. house...with a grand total..depending on variables for 140 to 160 thousand.
That house now, not including the cost of keeping it up thru the years is about 500 to 550 thousand.

With historical interest rates having been much higher than current year plus property taxes and maintenance, that home buyer from the late 80's would have paid out of pocket almost $500 thousand to own that $150 thousand home.
They certainly didn't make a $400 thousand profit.

Todays job market requires flexibly with location and moving. For that renting makes a lot of sense. Don't buy a home thinking it's going to make you money.

 

[hornygandalf]

With historical interest rates having been much higher than current year plus property taxes and maintenance, that home buyer from the late 80's would have paid out of pocket almost $500 thousand to own that $150 thousand home.
They certainly didn't make a $400 thousand profit.

Todays job market requires flexibly with location and moving. For that renting makes a lot of sense. Don't buy a home thinking it's going to make you money.

Keep in mind that a portion of the interest paid would have been clawed back through tax reductions. And that for some (or many) there is a peace of mind gained by 'owning' a property (even it if is actually the banks money), that isn't provided when renting.

 

[UhOh]

Keep in mind that a portion of the interest paid would have been clawed back through tax reductions. And that for some (or many) there is a peace of mind gained by 'owning' a property (even it if is actually the banks money), that isn't provided when renting.

What am I missing with regard to clawing back interest payments? Its possible in the US, not possible in Canada.
There is also peace of mind in being able to pick up and move whenever you want and not have to deal with selling a home and paying realtor fees plus the carrying costs until sold.

 

[87112]

I could never buy a home. I'm a gypsy. When you own something you are responsible for everything, I like to call my landlord when there is a problem.

House = grass, roof, gutters, hot water heater, plus other indoor/outdoor maintenance.
Apt = keep the suite clean.

I know, I rented out a townhome before. The renter did not have to pay the 290 homeowner dues which covered water and sewage and the lovely property taxes which both things added to about 425 per month.

 

[vancity_cowboy]

With historical interest rates having been much higher than current year plus property taxes and maintenance, that home buyer from the late 80's would have paid out of pocket almost $500 thousand to own that $150 thousand home.
They certainly didn't make a $400 thousand profit.

Todays job market requires flexibly with location and moving. For that renting makes a lot of sense. Don't buy a home thinking it's going to make you money.

agreed ^^

not many people calculate the interest paid out into their 'happy' stories of rent vs. own

having said that, lending institutions treat you a WHOLE lot better when you can say that you own

 

[UhOh]

agreed ^^

not many people calculate the interest paid out into their 'happy' stories of rent vs. own

Interesting how thats always left out. Relative to the DOW over the same period in the above mentioned example, housing has been a poor investment. From 1989 to now the DOW is up 650%

 

[lenny]

Thanks for the replies. It's interesting to see the different perspectives.

Here's a bit re what a Canadian university professor says:

"Would you be better off financially renting or buying a home?"

"Every year, Frank Tristani assigns his McMaster University finance students the task of showing whether renting or buying a home makes you wealthier.

"As Mr. Tristani scores the results, owning never wins. “Over six years, no one has been able to substantiate buying as creating more wealth over the long term,” he told me in an e-mail....

"There will never be a definitive answer to the question of how owning a home compares to lifelong renting, but we can at least dismiss the old “renting is financial idiocy” view as Flat Earth thinking. An analysis supplied by Mr. Tristani suggests a renter with steely savings discipline could actually end up wealthier than a homeowner.

"Before we delve into the numbers, let’s look at Mr. Tristani’s background. The 60-year-old spent more than 34 years in the banking sector, managing branches and working in the wealth management and commercial credit areas."

http://www.theglobeandmail.com/glob...lly-renting-or-buying-a-home/article11952313/

 

[Chef99]

Yes, renting is throwing your money away. The only sense it makes to rent is if you're saving cents in order to buy i.e. the rent your paying is much less than a mortgage. As soon as you can afford to buy, do it. Over the long run, real estate is only going to get more expensive and so your equity is increasing. The Vancouver market is not going to crash, some people have been saying it's going to happen for about 20 years now, it makes me laugh. It may slow down, it may decrease slightly for 2-3 years but if you hang on to something for 7-10 years, you will not lose.

 

[riceraw]

With historical interest rates having been much higher than current year plus property taxes and maintenance, that home buyer from the late 80's would have paid out of pocket almost $500 thousand to own that $150 thousand home.
They certainly didn't make a $400 thousand profit.

Todays job market requires flexibly with location and moving. For that renting makes a lot of sense. Don't buy a home thinking it's going to make you money.

depends where you live, I have a feeling most of the repliers are on the west coast.
I somewhat buy property (residential so far) as a source of income and investment
I bought my first home in my 20s, rented out rooms to my friends, my gf wanted me to move in with her so I just continued to rent my house
after a few years I sold that one and bought another, I made a decent amount (80k off the sale) as well as an extra 750 a month off rent after my expenses

it makes perfect sense in my city to own, and own as much as you can
from what I hear rent out west is very low right now in some parts so if one has no reason to own, and might be moving around then rent
there is no black and white

 

[hornygandalf]

It is interesting that renting in Vancouver could be considered better economically than buying, when the vacancy rate is so low and rents are pretty darn high out here.

 

[escapefromstress]

Micro-Condos

Canadian real estate is out of reach for buyers in some cities. The solution? Build smaller.

That's how a number of developers are tackling the problem, turning to "micro-condos" in order to help prospective buyers find a home in cities facing price pressures.

"Micro-condos," units that measure as little as 226 square feet, continued to spread across Canada in 2014, as Smart House Ottawa put 151 units measuring anywhere from 315 to 598 square feet on the market. Prices start at $179,900.

Statistics around Canadian populations certainly illustrate conditions in which micro-condos could succeed.

A report by Pricewaterhouse Coopers and the Urban Land Institute from earlier this year found that home buyers are opting for downtown living over suburbia — indeed, the populations in urban centres went up by 7.1 per cent from 2006 to 2011.

One of the factors attracting them there is the opportunity to live and work in the same place, and to avoid long commutes.

Reliance Properties president Jon Stovell knows this.

His company has developed two micro-condo projects, one in Victoria, another in Vancouver, and is planning another for the latter's downtown.

In 2012, Reliance renovated a former hotel in Vancouver's Downtown Eastside and turned it into the Burns Block, 30 units of rental apartments that ranged in size from 226 to 291 square feet.

The following year, it opened sales on The Janion, a historic hotel in B.C.'s capital that is being renovated to accommodate 122 condo units whose size varies between 243 and 352 square feet.

http://www.huffingtonpost.ca/2014/12/23/micro-condos-canada-real-estate_n_6352118.html