Buying v/s Renting
Apr 19th 2012, 5:53 pm
#31
Lost in BE Cyberspace
Joined: Aug 2005
Location: South of Calgary
Posts: 13,374
Re: Buying v/s Renting
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.
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.
What about the fact that one's landlord may choose to terminate the tenancy and the resulting costs in relocating?
Apr 19th 2012, 7:28 pm
#32
Joined: Sep 2008
Posts: 12,830
Re: Buying v/s Renting
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".
However this is why some people get a good ROI and make good money, by taking a risk and others don't because they won't take the risk. Sometimes you win, sometimes you don't. I have lost on some deals and made good on others, end of the day I am well ahead of the game.
There is the other phrase, 'horses for courses'. Some are suited to investing and speculation, others are not.
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.
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".
However this is why some people get a good ROI and make good money, by taking a risk and others don't because they won't take the risk. Sometimes you win, sometimes you don't. I have lost on some deals and made good on others, end of the day I am well ahead of the game.
There is the other phrase, 'horses for courses'. Some are suited to investing and speculation, others are not.
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.
If you bought 4 years ago you may have a loss, prices were high then, so now is the time to buy, when they are low, then you make a profit. If you bought 10 years ago, event though prices went down recently, you'd still be ahead of the game. If your bought mutual funds 4 years ago, you could be looking at a loss right now as well. If you hold cash, you'd be a few percent ahead, in the long time you cash would drag behind real estate prices. Four years is short term in real estate and you'd have to get in at the right time to make a good return in that time or have bought in really low in a distress sale for example.
The plane purchase my buddy and I just made, it is an asset that depreciates, so we sold investments to pay for it, then borrowed to replace the investments, now the interest is deductible. Not anyone with investments could do for a house purchase (although now my OH has found out about my acquisition, I may be looking at living in the thing anyway).
Last edited by Aviator; Apr 19th 2012 at 7:43 pm.
Apr 19th 2012, 7:43 pm
#33
Up Your Kilt
Joined: Mar 2012
Location: 1313 Mockingbird Lane, Mockingbird Heights
Posts: 1,621
Re: Buying v/s Renting
lwilli63 has it right with
What if it doesn't or what if it does but just marginally. What happens if interest rates rocket up to the high teens or twenty's? Remember the 80's. Have you ever sat down and figured out how you have paid the banks for the privilege of lending you money?
Everyone's rich if you get in at the bottom of a cycle and then get out at the top.
The simplistic way I look at is like this - don't think of it as return on your investment but think of it as if I buy and sell in X number of years how much money per year did I make. Then think if I just rented how much money do I have available to put away because I'm not shoveling it into a house.
Sorry you if you ever go thru a divorce and get taken to the cleaners and actaully have to account for everything, it adds up. You may think it's all insignificant but try add it up over a period of years. For me renting, it's $1k a month, period, no other costs. For a house, say the government let you write off all your house expenses - I'm sure you'd be able to come to a whack of cash. All the little things in a house are an expense and do add up. And yes I'm splitting hairs, lol.
Does this happen anymore, lol. So, if you use this example, you still have to add in property taxes, power, tv, heat, etc.
Just here to stir the pot.
PS: Aviator - nice toy!
underlying assumption is that property will continue to rise
Everyone's rich if you get in at the bottom of a cycle and then get out at the top.
The simplistic way I look at is like this - don't think of it as return on your investment but think of it as if I buy and sell in X number of years how much money per year did I make. Then think if I just rented how much money do I have available to put away because I'm not shoveling it into a house.
In the overall scheme of things, a lawn mower and gardening tools are insignificant maybe a few hundred, a hot water tank $600
once the property is paid for
Just here to stir the pot.
PS: Aviator - nice toy!
Last edited by Hawk13; Apr 19th 2012 at 7:46 pm.
Apr 19th 2012, 7:48 pm
#34
Joined: Sep 2008
Posts: 12,830
Re: Buying v/s Renting
lwilli63 has it right with What if it doesn't or what if it does but just marginally. What happens if interest rates rocket up to the high teens or twenty's? Remember the 80's. Have you ever sat down and figured out how you have paid the banks for the privilege of lending you money?
Everyone's rich if you get in at the bottom of a cycle and then get out at the top.
The simplistic way I look at is like this - don't think of it as return on your investment but think of it as if I buy and sell in X number of years how much money per year did I make. Then think if I just rented how much money do I have available to put away because I'm not shoveling it into a house.
It is a nice piece of kit, got to take it for a test run before handing over the dosh. Now I can go over the rocks to Calgary from my house to Springbank in 2.25 hours and in any weather (for the most part).
Sorry you if you ever go thru a divorce and get taken to the cleaners and actaully have to account for everything, it adds up. You may think it's all insignificant but try add it up over a period of years. For me renting, it's $1k a month, period, no other costs. For a house, say the government let you write off all your house expenses - I'm sure you'd be able to come to a whack of cash. All the little things in a house are an expense and do add up. And yes I'm splitting hairs, lol.
Does this happen anymore, lol. So, if you use this example, you still have to add in property taxes, power, tv, heat, etc.
Just here to stir the pot.
Everyone's rich if you get in at the bottom of a cycle and then get out at the top.
The simplistic way I look at is like this - don't think of it as return on your investment but think of it as if I buy and sell in X number of years how much money per year did I make. Then think if I just rented how much money do I have available to put away because I'm not shoveling it into a house.
It is a nice piece of kit, got to take it for a test run before handing over the dosh. Now I can go over the rocks to Calgary from my house to Springbank in 2.25 hours and in any weather (for the most part).
Sorry you if you ever go thru a divorce and get taken to the cleaners and actaully have to account for everything, it adds up. You may think it's all insignificant but try add it up over a period of years. For me renting, it's $1k a month, period, no other costs. For a house, say the government let you write off all your house expenses - I'm sure you'd be able to come to a whack of cash. All the little things in a house are an expense and do add up. And yes I'm splitting hairs, lol.
Does this happen anymore, lol. So, if you use this example, you still have to add in property taxes, power, tv, heat, etc.
Just here to stir the pot.
Without my strategies, had I just stashed the cash, or worse spent it unwisely, I could not afford the lifestyle I now have. It was not handed to me on a plate, I worked for it, planned what to do with it and took some chances, some of which paid off, others did not. That's the name of the game.
Last edited by Aviator; Apr 19th 2012 at 7:53 pm.
Apr 19th 2012, 7:53 pm
#35
Up Your Kilt
Joined: Mar 2012
Location: 1313 Mockingbird Lane, Mockingbird Heights
Posts: 1,621
Re: Buying v/s Renting
Just to stir even more - anyone out there doing a reverse mortgage?
And what if you invested in commodities like gold? Would you be better off?
And what if you invested in commodities like gold? Would you be better off?
Last edited by Hawk13; Apr 19th 2012 at 7:58 pm.
Apr 19th 2012, 8:00 pm
#36
Beep
Joined: Jan 2009
Location: Here
Posts: 8,311
Re: Buying v/s Renting
The baby boomers have had a great financial run for sure. Not sure the later generations will have it as lucrative or easy but who knows.
I still say buy, but wait a few more years for the correction. Areas in the Lower Mainland will be hit first and possibly hardest. Just a guess of course
I still say buy, but wait a few more years for the correction. Areas in the Lower Mainland will be hit first and possibly hardest. Just a guess of course
Apr 19th 2012, 8:02 pm
#37
Nil Desperandum Illegitim
Thread Starter
Joined: Jul 2009
Posts: 71
Re: Buying v/s Renting
The baby boomers have had a great financial run for sure. Not sure the later generations will have it as lucrative or easy but who knows.
I still say buy, but wait a few more years for the correction. Areas in the Lower Mainland will be hit first and possibly hardest. Just a guess of course
I still say buy, but wait a few more years for the correction. Areas in the Lower Mainland will be hit first and possibly hardest. Just a guess of course
Where's that damn crystal ball when I need it.
Apr 19th 2012, 8:12 pm
#38
Born again atheist
Joined: Jul 2005
Location: Europe (to be specified).
Posts: 30,259
Re: Buying v/s Renting
Where it always will be I'm afraid. How are you going to feel in 10 years (when you're 55) if you rent all that time and property values and your rent have gone up by 50% while your investments and salary have only gone up 20%?
Apr 19th 2012, 8:17 pm
#39
Nil Desperandum Illegitim
Thread Starter
Joined: Jul 2009
Posts: 71
Re: Buying v/s Renting
And I think that herein lies my problem: if I were half as sanguine about the future as you and many other posters on this thread it would be a no-brainer.
Apr 19th 2012, 8:39 pm
#40
Up Your Kilt
Joined: Mar 2012
Location: 1313 Mockingbird Lane, Mockingbird Heights
Posts: 1,621
Re: Buying v/s Renting
Where it always will be I'm afraid. How are you going to feel in 10 years (when you're 55) if you rent all that time and property values and your rent have gone up by 50% while your investments and salary have only gone up 20%?
If you whacked you money into GOLD wouldn't that be a better investment than what you would get from your house?
Don't get me wrong, I still think and feel I should buy a house but how much of that is ingrained in us from our parents and what you figure your expected to do. Sometimes you need to take a giant step back, crunch the numbers, scratch your head and go hmmmm.
Now, I have to get back to work to make some money that won't be invested wisely as I'll be going to the pub for beer and wings and watching the hockey playoffs. Maybe next year I'll buy some gold.
Last edited by Hawk13; Apr 19th 2012 at 8:43 pm.
Apr 19th 2012, 8:42 pm
#41
Born again atheist
Joined: Jul 2005
Location: Europe (to be specified).
Posts: 30,259
Re: Buying v/s Renting
As you said, the past is no guarantee of future performance, but it is a guide and the only one we have. House buying is always a long term proposition, just make very sure you can comfortably meet the PIT payments (even if, Dog forbid, they double) and then forget about the market for the next 20 years and just get on with your life & career.
Apr 19th 2012, 8:59 pm
#42
Lost in BE Cyberspace
Joined: Aug 2005
Location: South of Calgary
Posts: 13,374
Re: Buying v/s Renting
Gold over the last 10 years : low of $301.80 USD per ounce high of $1,889.70 USD and sitting at $1,333.34.
If you whacked you money into GOLD wouldn't that be a better investment than what you would get from your house?
Don't get me wrong, I still think and feel I should buy a house but how much of that is ingrained in us from our parents and what you figure your expected to do. Sometimes you need to take a giant step back, crunch the numbers, scratch your head and go hmmmm.
Now, I have to get back to work to make some money that won't be invested wisely as I'll be going to the pub for beer and wings and watching the hockey playoffs. Maybe next year I'll buy some gold.
If you whacked you money into GOLD wouldn't that be a better investment than what you would get from your house?
Don't get me wrong, I still think and feel I should buy a house but how much of that is ingrained in us from our parents and what you figure your expected to do. Sometimes you need to take a giant step back, crunch the numbers, scratch your head and go hmmmm.
Now, I have to get back to work to make some money that won't be invested wisely as I'll be going to the pub for beer and wings and watching the hockey playoffs. Maybe next year I'll buy some gold.
Apr 19th 2012, 9:02 pm
#43
Joined: Sep 2008
Posts: 12,830
Re: Buying v/s Renting
Not to be forgotten, there is no CGT on any gain in the value of your primary residence, investment gains are subject to CGT or full rate of tax depending on the investment and can push your marginal rate through the roof. You could (and likley would) end up with a hefty tax bill on investment gains.
Last edited by Aviator; Apr 19th 2012 at 9:05 pm.
Apr 19th 2012, 10:07 pm
#44
Island life at last
Joined: Aug 2009
Location: BC
Posts: 2,715
Re: Buying v/s Renting
We have been looking just speculatively at property to buy here as our primary residence (lower mainland).
We have a lump sum from our UK house sale which would make a substantial deposit and we are earning a decent enough wage for mortgage payments.
These things are pertinent to us.
* We have a lovely rental which is in a great location that we love, close to current work and things we like.
*The rent is very reasonable and allows us to also save.
* We could not afford to buy a property here anything like what we rent.
* We are not sure how long we will want to live in this area, having not long arrived.
*Property in this area is hugely overpriced compared to other areas.
For all these reasons we think it is wise to continue to rent for a while yet.
However, it never hurts to look and if a great property came up we would be in a good position to make a move on it.
I don't think that there is any hard and fast rule about which is better - to rent or to buy.
Personal circumstances are crucial and it is about timing as much as anything.
Buying is great as long as you have a decent deposit to put down, a steady job which guarantees the mortgage payments, some spare cash for taxes and upkeep, can decide when to sell and are fairly sure that property prices will appreciate in the area you are buying in.
Fulfilling these criteria is hard for quite a lot of people at the moment.
We have a lump sum from our UK house sale which would make a substantial deposit and we are earning a decent enough wage for mortgage payments.
These things are pertinent to us.
* We have a lovely rental which is in a great location that we love, close to current work and things we like.
*The rent is very reasonable and allows us to also save.
* We could not afford to buy a property here anything like what we rent.
* We are not sure how long we will want to live in this area, having not long arrived.
*Property in this area is hugely overpriced compared to other areas.
For all these reasons we think it is wise to continue to rent for a while yet.
However, it never hurts to look and if a great property came up we would be in a good position to make a move on it.
I don't think that there is any hard and fast rule about which is better - to rent or to buy.
Personal circumstances are crucial and it is about timing as much as anything.
Buying is great as long as you have a decent deposit to put down, a steady job which guarantees the mortgage payments, some spare cash for taxes and upkeep, can decide when to sell and are fairly sure that property prices will appreciate in the area you are buying in.
Fulfilling these criteria is hard for quite a lot of people at the moment.
Apr 19th 2012, 10:17 pm
#45
Born again atheist
Joined: Jul 2005
Location: Europe (to be specified).
Posts: 30,259
Re: Buying v/s Renting
I don't think that there is any hard and fast rule about which is better - to rent or to buy.
Buying is great as long as you have a decent deposit to put down, a steady job which guarantees the mortgage payments, some spare cash for taxes and upkeep, can decide when to sell and are fairly sure that property prices will appreciate in the area you are buying in.
Fulfilling these criteria is hard for quite a lot of people at the moment.
Fulfilling these criteria is hard for quite a lot of people at the moment.