Is It Better to Rent or Buy?

Renting vs Buying Save

 

So, the night of offers and counteroffers is over and you can proudly boast your home sold for the price you wanted. Congratulations. But with the next rising sun it seems all your priorities shift to one terrifying and all consuming reality, “I’ve gotta buy another house”. Take a breath. What’s the rush? There’s another option you should seriously consider. Renting could be the smarter short- term strategy to consider.

 

First of all get your head out of the old-school thinking that renting is throwing your money away. Our rental market has undergone an incredible transformation from the days of when we all were just starting out. Today most urban Canadian markets have pumping out a steady stream of condominium developments generating a plethora of available rental inventory. In addition, investors over the years have purchased income based properties as they offered a better rate of return than what banks provide.
There are some basic tenets in our housing market and here are two:
1. Owning has ongoing regular costs which are all paid by homeowners,
2. In renting a tenant’s primary obligation is to pay a monthly rent.
Here’s an assessment of my yearly costs of home ownership; however most readers realize that you can apply similar metrics to your own local housing expenditures:
Home Ownership

 

Property Taxes
$4,000
Hydro and Heating
$3,500
Home Maintenance (Yearly Average)
$5,000
Water and Sewage
$1,200
Property & Personal Contents Insurance
$1,000
Total Yearly Costs
$14,700
Following a quick online search, I found I could rent a1,000 sq ft, 2 bedroom condo (including utilities, parking, concierge and fitness facility) a couple blocks away from where I live for $2,000 a month on a one year lease.
Renting

 

Rent Yearly
$24,000
Property Taxes
Included
Hydro and Heating
Included
Home Maintaince
Included
Water and Sewage
Included
Personal Contents Insurance Only
$500
Total Yearly Costs
$24,500
The difference is renting will cost you approximately $10,000 more a year than owning. However it should be noted that if you consider the interest payments on any outstanding mortgage on a home during a single year the renting option begins to look significantly more favourable. Roll in the headaches associated with endless home repairs and other maintenance costs the renting scenario starts to shine even brighter – those duties now fall squarely on the shoulders of the landlord.
So consider liberating yourself from the 60 to 90 day frenzied selling and buying cycle. Sitting on the renter’s camp for a year could provide you with a tactical advantage when it comes to timing your re-entry to the ever shifting resale housing market. By renting you give yourself the gift of time, which translates into not being rushed in finding the right home and provides you with a stronger negotiating position knowing that you don’t have a property to sell… therefore one less condition.
If you do sell your home and don’t plan on purchasing another contact your mortgage provider regarding what penalty, if any, they would impose on your breaking the mortgage early.
Michael McCann