Renting vs Buying - The eternal debate
- Thread starter PsychoBandito
- Start date
AudioAltima
New member
Both of you....
... Typical close-minded comments.
Its a question of quality of life. For some thats living in an appartment (typically for location or budget)... For others, its having a basement, personnal garage, backyard with privacy.
You cant say one is wrong... And as i said earlier there is no spread sheet that can tell you which is better. The market fluctuates too much, by location, renovations, transport, etc.
MrSpace
Legacy Member
I've never said one is wrong or right, but you can't assume one is better than the other regardless of specifics.
This guys just states "buying is better, renting you throw money away, which is utter crap.
DivImport
New member
Copy pasting what I posted in the "Faux riches" thread.
In the current housing market, outside of hyperlocalised market exceptions, there is no point in purchasing a home/condo. The latest Desjardin's study of Quebec's real estate market revealed a major crisis rearing its head. There are 9 vendors per buyer in Quebec's condo market. Sounds unstable? It hasn't even begun yet. Oh and Montreal is next, and you guys will get it even worse. (see Griffintown aka Condo land).
Unless some of you still think house prices will double in 10 years like they did in the last decade for our parents, you should consider alternatives and start calculating what real home ownership costs.
New roof (10 - 15 years)? Oh 10,000$
New pool canvas (8 years)? Oh, 8,000$.
You want to sell your house 10 - 20 years down the road? You better update your kitchens and bathrooms (about 15-20k per room for a quality job)
What about paint?
What about floors?
What about AC (and unexpected repairs along with it)?
The bottom line is pretty clear, there are fewer and fewer ways to make money off homeownership. The babyboomers have left us with an over-inflated housing market. A major correction has happened in the US, it will happen here.
For me, as a young entrepreneur, owning a home is utterly stupid:
1. Potential rising interest rates
2. Expected housing crash
3. Lack of flexibility (money stuck in your house, aka wallpaper money)
4. Unexpected expenses (roof, plumbing, pool, general renovations).
My alternative? Be disciplined, plan for conservative investments, live off interest. Leave the risk of home ownership to ordinary folks, those who still think it's the American Dream and a "safe" investment.
At 60,000$ put away at 8% interest rate, you have around 5,000$ to rent per year (not much, 4 to 6 months in Montreal for average-higher). Calculate a 15,000$ investment on a yearly basis (average mortgage payments) and within 5 years you are living off the interest of your 135,000$ capital. Your standards of living just changed; the flexiblity of renting allows you to move to a much nicer place, you now have 10,800$ worth of interest before taxes (a much lower tax rate than standard salary and potentially a great % put away tax free TFSA). 15,000$ sounds high? Take into consideration I do not have as many personal expenses as salaried people (phone, car, internet, restaurants, etc). FYI I'm currently putting away quite a bit more.
Within 10 years, without taking into account the possibility of compounded interest (living off 100% interest, none reinvested) or additional investments (15,000$ being quite low) you have 210,000$ put away.
Interest rates go up? You're laughing your way to the bank as you move your portfolio from a somewhat risky (relatively) 50/50 (stocks & dividends, bonds) to a safe 20/80 split and watch your standards of living move up as everyone else suffers due to high interest rates.
There will soon never be a better time to say; cash will be king.
Note, you should not take anything above as investment suggestions, consult your financial planner. Every situation differs, mine just happens to require a different, more flexible way to put a roof over my head
In the current housing market, outside of hyperlocalised market exceptions, there is no point in purchasing a home/condo. The latest Desjardin's study of Quebec's real estate market revealed a major crisis rearing its head. There are 9 vendors per buyer in Quebec's condo market. Sounds unstable? It hasn't even begun yet. Oh and Montreal is next, and you guys will get it even worse. (see Griffintown aka Condo land).
Unless some of you still think house prices will double in 10 years like they did in the last decade for our parents, you should consider alternatives and start calculating what real home ownership costs.
New roof (10 - 15 years)? Oh 10,000$
New pool canvas (8 years)? Oh, 8,000$.
You want to sell your house 10 - 20 years down the road? You better update your kitchens and bathrooms (about 15-20k per room for a quality job)
What about paint?
What about floors?
What about AC (and unexpected repairs along with it)?
The bottom line is pretty clear, there are fewer and fewer ways to make money off homeownership. The babyboomers have left us with an over-inflated housing market. A major correction has happened in the US, it will happen here.
For me, as a young entrepreneur, owning a home is utterly stupid:
1. Potential rising interest rates
2. Expected housing crash
3. Lack of flexibility (money stuck in your house, aka wallpaper money)
4. Unexpected expenses (roof, plumbing, pool, general renovations).
My alternative? Be disciplined, plan for conservative investments, live off interest. Leave the risk of home ownership to ordinary folks, those who still think it's the American Dream and a "safe" investment.
At 60,000$ put away at 8% interest rate, you have around 5,000$ to rent per year (not much, 4 to 6 months in Montreal for average-higher). Calculate a 15,000$ investment on a yearly basis (average mortgage payments) and within 5 years you are living off the interest of your 135,000$ capital. Your standards of living just changed; the flexiblity of renting allows you to move to a much nicer place, you now have 10,800$ worth of interest before taxes (a much lower tax rate than standard salary and potentially a great % put away tax free TFSA). 15,000$ sounds high? Take into consideration I do not have as many personal expenses as salaried people (phone, car, internet, restaurants, etc). FYI I'm currently putting away quite a bit more.
Within 10 years, without taking into account the possibility of compounded interest (living off 100% interest, none reinvested) or additional investments (15,000$ being quite low) you have 210,000$ put away.
Interest rates go up? You're laughing your way to the bank as you move your portfolio from a somewhat risky (relatively) 50/50 (stocks & dividends, bonds) to a safe 20/80 split and watch your standards of living move up as everyone else suffers due to high interest rates.
There will soon never be a better time to say; cash will be king.
Note, you should not take anything above as investment suggestions, consult your financial planner. Every situation differs, mine just happens to require a different, more flexible way to put a roof over my head
Riffo
Well-known member
Tu récupères rien quand tu loues parce que t'as pas eu à payer la maison, seulement le coût inhérent au logement + un mince profit pour le locateur. Quand t'es proprio tu dois en+ débourser un prix d'achat au départ, et tu fais un profit à la vente qui va te permettre de récupérer une partie des coûts inhérents, mais jamais au complet.
SkyFall
New member
it always depends on YOUR situation and financials (what you like, what is your lifestyle, you much you make, how good you invest, etc..) on thing that I hate when people talk about buying (renting or buying is fine to me, you just have to find the right thing for you) is when people say buying is awesome because you buy and few years down the road your house is worth 10% more than what you paid (not real numbers just example) so I will make 10% profit....but people dont get that after you sold you house you have to live somewhere...if your house went up in price others too!
LePolak
Legacy Member
*disclaimer*: I'm not claiming to know much about renting vs buying
Back in college, i took a class on globalization/demographics/finances ect
The prof pointed out this: if you look at age demographics in Montreal, there's a lot of baby boomers. As kids are eventually going to move out from their parents places, baby boomers aren't really going to have a need for big houses anymore and will eventually look for condos (therefore condo prices will go up, and houses will go down.)
So they way I see it is that it's a gradual transition where kids move out into condos/appartments, and then eventually trade in with the older generation when they start families.
But bottom line is, I guess there's going to be a need for condos even with the current political situation.. I mean, how many established babyboomers are going to leave quebec after living here for their whole lives?
http://www.stat.gouv.qc.ca/regions/profils/profil06/societe/demographie/pers_demo/pers_demo06_an.htm
Again, not claiming to know my shit, just throwing out what the teacher said and using my thoughts to fill in the rest
Back in college, i took a class on globalization/demographics/finances ect
The prof pointed out this: if you look at age demographics in Montreal, there's a lot of baby boomers. As kids are eventually going to move out from their parents places, baby boomers aren't really going to have a need for big houses anymore and will eventually look for condos (therefore condo prices will go up, and houses will go down.)
So they way I see it is that it's a gradual transition where kids move out into condos/appartments, and then eventually trade in with the older generation when they start families.
But bottom line is, I guess there's going to be a need for condos even with the current political situation.. I mean, how many established babyboomers are going to leave quebec after living here for their whole lives?
http://www.stat.gouv.qc.ca/regions/profils/profil06/societe/demographie/pers_demo/pers_demo06_an.htm
Again, not claiming to know my shit, just throwing out what the teacher said and using my thoughts to fill in the rest
DivImport
New member
The problem with this logic is that most baby boomers have no desire to scale down their lifestyle and won't move from a 500,000$ house to a 250,000$ condo (the ones young people are looking to buy) and we absolutely do not have the means to purchase 500,000$ homes with the current mortgage restrictions and impending interest rate hike.
Cash is king, and the youth has none.
Cash is king, and the youth has none.
LePolak
Legacy Member
Why do you say that? I know for a fact my folks will. I'm not talking about down-scaling lifestyle, but simply size because there won't be any use for a family house. I definitely can't picture my old man wanting to shovel snow/cut grass/maintain a house.
Lonestar
MTL MOTO PRO
Polak has a point.. The only reason I got a chance to buy my condo was because the previous buyers reneged on a deal because the old baby boomer couple realized they had too much shit in their old home to relocate to a smaller condo. Financially speaking it just makes sense especially if regular maintenance aint your thing. There might not be a huge geezer relocation considering most elderly couples downright own their homes (no mortgages) but as people get older and older, moving into smaller pads once the kids are out just makes financial sense by giving them more disposable income to live out their lives with.
With many empty-nesters now looking to move into a more elderly friendly environments.. condos especially near shopping centers are definitely a notch over retirement homes which is almost considered like a jail to most old people. A 4.5 condo with elevator and garage near a shopping center will cost more than a bungalow in a couple years time. Mark my words!
With many empty-nesters now looking to move into a more elderly friendly environments.. condos especially near shopping centers are definitely a notch over retirement homes which is almost considered like a jail to most old people. A 4.5 condo with elevator and garage near a shopping center will cost more than a bungalow in a couple years time. Mark my words!
AudioAltima
New member
Hate to add this as well, but as the baby boomers 'pass on', their kids receive their inheritance. The housing cycle starts over. Some renovate with the inheritance and some upgrade. Cash is king, but the lifestyle will continue, maybe just not immediately.
Lexus
Moderator
Here are some of the issues with this theory:
- a lot of condos, especially suburban ones, are not elderly friendly IMO and are definitely geared towards young singles, couples, small families that are 1st time home buyers or have a smaller budget. They have no elevator, there is a little work to do and not all are close to services.
- bungalows (older or newer), except for yard word/shoveling which older people usually contract out, are very elderly friendly because of the one-level setup + no stairs (except to go to the basement that they won't use much anyway).
So I think that demand for cottages/2-3 story condo buildings will decrease in the long run with the aging of the population while the demand for larger building condos and bungalows will at least hold steady or decrease much less.
On my street a couple of older bungalows were sold in the last year and they were bought by older people that wanted to downsize and from what they told me, did not want to be in a condo, really wanted their little private house but just much smaller and without the maintenance of a big cottage with large piece of land.
FLIP
Legacy Member
After long thought, I can't see myself buying a condo unless it is a steal.
I am saving for a home with 20% down to avoid additional fees.
My mentality when buying the home and price range is simple:
1) Buy big enough to fulfill current needs and a little extra space for future creativity (instead of selling home/buying another that is a bit larger)
2) Buy big enough to grow a small family (to avoid having to be in a rush sale for a bigger home)
3) Buy a house with SIMPLE renovations to make it "mine". Even if the house is up to date modern, down the road it won't be something that I'd probably want)
4) Good neighborhood on an off busy street but hopefully near a main road/highway
5) NO POOL, but make sure my neighbor has one
6) Buy it to live in it and to love it. Try not to get into the position of having to sell quickly for what ever reason.
It's simple, land in good spots are getting harder to come by but if you get a good spot it's your "HOME". You're there to live in it, if interest rates go up i'll still be able to live in my HOME, it's my castle and there should be no reason for me to sell. Once this is paid off, guess who's going to have it? My kids will have it, but lets hope they don't turn into douchebags and sell the house for cars.
You can see it as "yourself" living the life in a home or renting, or "yourself and your others".
I am saving for a home with 20% down to avoid additional fees.
My mentality when buying the home and price range is simple:
1) Buy big enough to fulfill current needs and a little extra space for future creativity (instead of selling home/buying another that is a bit larger)
2) Buy big enough to grow a small family (to avoid having to be in a rush sale for a bigger home)
3) Buy a house with SIMPLE renovations to make it "mine". Even if the house is up to date modern, down the road it won't be something that I'd probably want)
4) Good neighborhood on an off busy street but hopefully near a main road/highway
5) NO POOL, but make sure my neighbor has one
6) Buy it to live in it and to love it. Try not to get into the position of having to sell quickly for what ever reason.
It's simple, land in good spots are getting harder to come by but if you get a good spot it's your "HOME". You're there to live in it, if interest rates go up i'll still be able to live in my HOME, it's my castle and there should be no reason for me to sell. Once this is paid off, guess who's going to have it? My kids will have it, but lets hope they don't turn into douchebags and sell the house for cars.
You can see it as "yourself" living the life in a home or renting, or "yourself and your others".
TheGreatOne
Legacy Member
I'm partial to buying
I will also agree with many that it also depends on location.
I'm in the Atwater Market and will have no issues selling, we'll make about 90K when we sell out condo and we didn't even buy it when it went up. We wouldn't get that kind of return by renting. As for School taxes, Municipal etc, thats just costs you have to factor into your cost of living.
I also think when some think renting, they just think apartments (which I couldn't imagine living in) but I imagine many are talking about renting a condo, home or townhouse also. There could definitely be some benefits to doing it that way also but I think I would only rent if I owned something else.
God forbid something went really bad, besides liquidating things like our cars, we would have our property as an asset.
I will also agree with many that it also depends on location.
I'm in the Atwater Market and will have no issues selling, we'll make about 90K when we sell out condo and we didn't even buy it when it went up. We wouldn't get that kind of return by renting. As for School taxes, Municipal etc, thats just costs you have to factor into your cost of living.
I also think when some think renting, they just think apartments (which I couldn't imagine living in) but I imagine many are talking about renting a condo, home or townhouse also. There could definitely be some benefits to doing it that way also but I think I would only rent if I owned something else.
God forbid something went really bad, besides liquidating things like our cars, we would have our property as an asset.
logik23
Legacy Member
The main problem I see with buying is that most people seem to think there is such a thing as job security these days.
How do you figure?
How do you figure?
TheGreatOne
Legacy Member
Because we were thinking of getting a townhouse up the street so put our condo on the market briefly. We had an offer for 395K but changed our minds. Bought it for 309K just over 3yrs ago. So ya, "almost" 90K
We get random mailings from certain realtors to see if we are selling, the area is still hot.
MrSpace
Legacy Member
$90k, but did not factor in that he must substract moving fees, agent, welcome taxes and also cost of lost opportunity on the cashdown and the difference in rent vs mortgage/maintenance/taxes/condo fees each month.
if you can make $90k, I would sell this right now!
TheGreatOne
Legacy Member
True story...there are the other intangibles, just saying in principal, almost 90K before those intangibles.
I find it crazy that 3 yrs ago I moved from phase 1 to phase 4 (there are 4 building in the Quai des Esclusier) and paying welcome tax for moving down the block...awesome lol.
at the end of the day, some money will be made...wish I bought when it was built. An old Neighbour bought a 3 bedroom for 220K before it went up, sold for 580K the year before, I was jelly, smart investment. This is where buying can pay off.