scrubbedexpat133

So buy a 400k house with a 100k deposit and your mortgage is 14-1500 ish and your property tax will be lower.

What on earth costs 300 per month every month in maintenace???

Again more modest house = lower tax and maitenance

With the above you could be around your 2k per month rent and you are investing your money not giving it to someone else.

As RICH says once its paid then you are quids in.

I am renting right now and its driving me up the wall as I could be paying about the same in Mortgage

lwilli63

Relevant questions.

Do I plan to stay in Canada after retirement? That's way, way in the future but on current plans I would spend May-Sep here and the rest of the year in the southern hemisphere.

I'm 45.

The last question is the killer question but I'd like to think yes, and it would be $2,000 adjusted for inflation in 20 years time which could be $3,000 or $4,000 who knows? But I take your point.

lwilli63

If you can buy a house for what you pay in rent then I agree: it's a total no-brainer. However, as JonBoyE pointed out the yields here in Vancover are brutal. It's a Vancouver thing, I chose to live here for the clement weather and the lifestyle but on the downside the price of property is ridiculously high.

Trust me if I could buy a decent house round here for $400,000 I would but I'd be looking at a run down hovel in a pretty rough area for that price range.

Novocastrian

Obviously I don't know (or want to know) your present or future income, but 20 years is long enough to pay off a mortgage (I did it in 17), after that you presumably will have an asset worth quite a lot. Then you can downsize and buy your second home in the bottom half for cash and live financially secure.

If you rent for the next 20 years..........?

scrubbedexpat133

Its not just a Vancouver thing I used to live in the New Forest so fully understand but there is a point when the numbers outweigh the lifestyle

Aviator

In BC it is $425k threshold. Property tax applies to all home owners, the exemptions is for property transfer tax, and to be exempt an individual must not have owned a home before (anywhere in the world).

el_richo

Try this link. It's crude ish but interesting ish

http://www.nytimes.com/interactive/b...alculator.html

lwilli63

+1

Good find el_richo. I should've guessed that there would be something on the web.

I plugged in some sensible / realistic figures (pertinent to my particular case) and assuming 2% capital growth of the property v/s a similar 2% annual increase in rent it turns out that I am better off renting by a very small margin.

Obviously by increasing the capital appreciation of the house the situation is reversed in favour of buying.

Ultimately, it boils down to how much the property will appreciate (or depreciate who knows) and interest rates over the next 20 years.

I guess I'm just going to have to consult my crystal ball and see what it comes up with.

Hawk13

Someone has to put their hand up for renting.

I was brought up that you started making it in life when you could afford your own house. So my parents live in a small community and have owned the same house for 30 years. If they were to sell it today, they would make about $160K on what they paid for it. That works out to just over $5K a year they made on it or if you divide it by two (‘cus I have two parents) they each made $2,500 bucks a year.

I’ve owned houses for 25 years in bigger cities, bought older heritage houses, fixed them up, sold them, bought a bigger, nicer house – that kinda thing. I went thru a divorce two years ago and was forced to sell the so called dream house and I got $100K out of my 50/50 share which works out to $4K a year.

I now rent a fully furnished place for $1K a month that includes internet, TV, heat, everything. I make the same salary but financially I pretend that I still have a house and I can easily put away more than $4K a year and still have money (that I didn’t have) to travel and see the world. Figuring out where to invest it is a whole other rant.

So what you never figure into buying a house is all the sweat equity you put in and all the little costs like say buying a lawn mower and gardening stuff or even having to replace the roof, the hot water tank or the major appliances. You also have to figure in your taxes and the interest you are paying on your mortgage because you could be using that money for other investments. The figure I used earlier don't include any of that, just purely waht you paid and what you got out.

The other thing no one ever takes into account is like what is happening in the States - that after say 10 years, your house is worth less than you paid for it. Or you do what most people do, find out your house is worth more, suck the equity out and buy toys like a new car, motorhome, boat, motorcycle, etc.

So if you are buying a house and renting it out and the rent you get covers absolutely everything, then yup go for it. But if you rent, you still need put away some cash to cover you down the road.

All that said, my gut tells me to buy but for now I’m going to keep on renting – that way,if I want to up a relocate, I don’t have the headache of selling.

lwilli63

Thank you Hawk. I was waiting for someone to wade in, in favour of renting.

Your point about all those expenses that you don't take into account when owning a home is exactly what I was referring to as "maintenance costs" and I estimate these to be conservatively speaking around $400 pcm.

If you rent and were to invest $400 per month (that you would save in maintenance costs) you could end up with as much as the profit you make on the house when you eventually decide to sell.

Former Lancastrian

Have you considered the rent to own option? I accept that it is not always available but does exist. My ex did that and now owns the home.
I know its not ideal for everyone but is doable.

lwilli63

Hi FL,

As you can gather I am no expert but I was told to be very careful with rent to own deals as they are normally offered by those who have not been able to sell their house outright. Also, I suspect the choice is limited.

As you say it might not work for everyone. Out of interest in what area / province did your ex do the rent to buy?

Aviator

However, look at the value performance of property vs where investments have gone. One of my RRSP investment is worth less today than it was 10 years ago, my cabin is worth 3 times what it was 10 years ago, my new home which we've had for a few years has increased in value way above any investments. A house I had in the UK I bought in 1980 for £27k, sold it 10 years later for £160k, they are selling now for £600, I got a 500% ROI, if I had it now it would be a 2200% return in 32 years. Very little if anything would give a conservative investor that return. If I still had the £27k cash it would be worth probably no more than £50k.

If your parents paid £10k for their house and made £160k, that would be a significant profit, way more than their initial investment would have made anywhere else. Just saying they would only make £160k is meaningless without know what percentage increase that was.

Property returns will always outstrip cash returns and low to mid risk investments. High risk you may do really well or lose your shirt.

In the overall scheme of things, a lawn mower and gardening tools are insignificant maybe a few hundred, a hot water tank $600, you can buy a house that does not need a new roof or if it does get that reflected in the price.

The world needs renters, otherwise landlords would not make any money.

For short term accommodation, renting makes sense, for long term if one can afford it, buying is a no brainer in my view.

I do agree with buying toys though, having just sealed a deal on a Cessna 400 (now just have to break it to the OH!).

Former Lancastrian

She did it in Winnipeg, Manitoba. Yes choice is limited and you have to be wary but isnt buying a house without taking the same precautions.
It worked for her and she is happy (more so without me ).
I agree its not for everybody.

lwilli63

Aviator,

Your underlying assumption is that property will continue to rise in future as it has in the past - remember the old hackneyed phrase "past performance is not a guide to future returns".

I don't know what the house price to average salary ratio is like for Greater Vancouver but let's say conservatively 6x. How much longer can the market sustain this kind of increase before housing becomes totally unaffordable to the locals.

You could say, "look at London where prices have been increasing relentlessly for a some time", well as a seller I can tell you that the prices bottomed out (SW London anyway) about 3-4 years ago and in fact have dropped about 8-10% during that period. So if I had bought my house in 2008 I'd be sitting on a loss.

I reckon house prices here may have reached a peak and may drop a bit over the next year or so, in which case it might be worth renting a while longer and buying (hopefully) cheaper.