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Buying v/s Renting

Buying v/s Renting

Old Apr 18th 2012, 12:04 am
  #1  
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Default Buying v/s Renting

Currently renting a house in Westwood Plateau (Coquitlam) but the owner has decided to sell so I'm pondering whether to buy or continue renting. I'm ambivalent at the moment. Having owned a house in UK for 20+ years and having rented over here for 18 months I can see the pros and cons for each option.

I'm also not convinced about the economics of buying in the sense that if you take into account all the money you spend on property tax and general maintenance on a purchased property you are probably no better off in the long run than if you rented over the same period of time - this of course assumes that property appreciation will not be as high as it has been of late.

Renting has its obvious advantages: don't like the neighbours - move, get fed up with the house - move, plus you don't need to worry about repairs and maintenance. No property tax either.

In terms of feeling more (or less) "secure" by owning or renting this really does not mean much to me. So I suppose whether to rent or buy will be for me a purely financial equation.

Dreary? I know but regrettably a necessity as I need a roof over my head because sleeping rough does not appeal to my very limited sense of adventure.

So, I'd be interested to hear any comments and views on buying v/s renting.
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Old Apr 18th 2012, 12:14 am
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Default Re: Buying v/s Renting

You pay property tax either way, it's just hidden in your rent.

Once you've paid your mortgage off the buying option's a no-brainer, surely? Fixed asset, with some overhead, but no large regular outgoings. Renting overhead never ends.

I'm happy for someone else to rent property off me, as it pays my mortgage off. Are you happy to do that on behalf of someone else?
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Old Apr 18th 2012, 12:33 am
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Default Re: Buying v/s Renting

Originally Posted by R I C H View Post
You pay property tax either way, it's just hidden in your rent.

Once you've paid your mortgage off the buying option's a no-brainer, surely? Fixed asset, with some overhead, but no large regular outgoings. Renting overhead never ends.

I'm happy for someone else to rent property off me, as it pays my mortgage off. Are you happy to do that on behalf of someone else?
I really don't think that it is that clear cut. Yes, after 20, 25 or 30 years you will have paid off your mortgage assuming of course you do not make any capital repayments above and beyond the minimum.

You are also making an assumption (not unreasonable given past history) that in 20 yrs time say the house will be worth more than it is today IN REAL TERMS.

I take your point about property tax being included in the rent, still I reckon on say $5,000 avg per year on maintenance, decoration, etc, etc. If you were to invest this conservatively at say 5% avg return per year you will be left with a nice little nest egg of $186,000 after 20 yrs. Also, by renting you are not subject to the vicissitudes of interest rates.

Last edited by lwilli63; Apr 18th 2012 at 12:36 am.
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Old Apr 18th 2012, 12:47 am
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Default Re: Buying v/s Renting

Originally Posted by lwilli63 View Post
I really don't think that it is that clear cut. Yes, after 20, 25 or 30 years you will have paid off your mortgage assuming of course you do not make any capital repayments above and beyond the minimum.

You are also making an assumption (not unreasonable given past history) that in 20 yrs time say the house will be worth more than it is today IN REAL TERMS.

I take your point about property tax being included in the rent, still I reckon on say $5,000 avg per year on maintenance, decoration, etc, etc. If you were to invest this conservatively at say 5% avg return per year you will be left with a nice little nest egg of $186,000 after 20 yrs. Also, by renting you are not subject to the vicissitudes of interest rates.
Yes you are. As interest rates go up stock market returns go down.

In essence you are taking a long-term punt that your investment return (and that means markets as you will never stay ahead on inflation with deposit interest) will be greater than the rise in price of residential real estate. We can only wait and see. In the meantime I live in a house I like. I don't get a kick out of reading investment account statements. You get to live in worry-free accommodation.

Who knows which of us will be better off in the long-run?
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Old Apr 18th 2012, 1:45 am
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Default Re: Buying v/s Renting

I'd buy, but wait for a couple of years until after the correction that's coming now the Chinese Economy is teetering
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Old Apr 18th 2012, 2:06 am
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Default Re: Buying v/s Renting

Originally Posted by lwilli63 View Post
I really don't think that it is that clear cut. Yes, after 20, 25 or 30 years you will have paid off your mortgage assuming of course you do not make any capital repayments above and beyond the minimum.

You are also making an assumption (not unreasonable given past history) that in 20 yrs time say the house will be worth more than it is today IN REAL TERMS.

I take your point about property tax being included in the rent, still I reckon on say $5,000 avg per year on maintenance, decoration, etc, etc. If you were to invest this conservatively at say 5% avg return per year you will be left with a nice little nest egg of $186,000 after 20 yrs. Also, by renting you are not subject to the vicissitudes of interest rates.

OK, here's an illustration for you - 2 years ago I purchased, for want of a better word, an investment property. I paid $320k for it, borrowed $250k. After overheads (mortgage, utility bills, property tax etc) each month, I clear a net of $800. Who's better off - the renter or the landlord?
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Old Apr 18th 2012, 2:20 am
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Default Re: Buying v/s Renting

One of my kids just bought a house instead of renting. We did the math and its a no brainer.

She is paying 35% less per month to own the place than she would pay to rent something similar, she can do what she likes with it and at the end of the day her investment will likely be ahead of inflation. I don't know of anyone worse off over the long term worse off by buying, I know of lots of renters who have no assets.
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Old Apr 18th 2012, 8:26 pm
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Default Re: Buying v/s Renting

i think it is sensible to rent for a 1 year or 2 esp if you have kids..to get to know the area you want to live in..beyond that it make little sense to rent long term.
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Old Apr 18th 2012, 10:25 pm
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Default Re: Buying v/s Renting

I couldn't rent a bachelor apartment for the amount I pay for my mortgage!

Even taking into consideration mortgage, property taxes and repair/maintenance costs - averaged out of the year - it is still considerably less (by about $500 a month) than the amount it would cost me to rent a 3 bedroom bungalow in the same area! I also have around $50,000 equity in the house, which would be non-existent if I rented.

If you buy somewhere and change your mind about the area after a while, you can always rent it out (for a profit) and find somewhere else to live.

No brainer. Buy.

Last edited by Siouxie; Apr 18th 2012 at 10:27 pm.
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Old Apr 18th 2012, 10:47 pm
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Default Re: Buying v/s Renting

We just bought. Our mortgage isn't hugely more than our rent was. We have a short amortization. In 15 yrs we own the lot.
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Old Apr 18th 2012, 10:58 pm
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Default Re: Buying v/s Renting

Originally Posted by siouxie View Post
I couldn't rent a bachelor apartment for the amount I pay for my mortgage!

Even taking into consideration mortgage, property taxes and repair/maintenance costs - averaged out of the year - it is still considerably less (by about $500 a month) than the amount it would cost me to rent a 3 bedroom bungalow in the same area! I also have around $50,000 equity in the house, which would be non-existent if I rented.

If you buy somewhere and change your mind about the area after a while, you can always rent it out (for a profit) and find somewhere else to live.

No brainer. Buy.
Hmmm, interesting a few posters have said it's cheaper to repay a mortgage than rent.

The house I currently rent is worth $700,000 and I rent two floors for $2,000 pcm. Say, I made a downpayment of $100,000 and raised a mortgage for $600,000 the repayments would be around $2,800, plus around $400 property tax, plus maintenance of say $300 pcm = $3,500 pcm . This doesn't include the one-off cost of the property transfer tax which is significant.

Last edited by lwilli63; Apr 18th 2012 at 11:02 pm.
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Old Apr 18th 2012, 11:17 pm
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Default Re: Buying v/s Renting

Originally Posted by lwilli63 View Post
Hmmm, interesting a few posters have said it's cheaper to repay a mortgage than rent.

The house I currently rent is worth $700,000 and I rent two floors for $2,000 pcm. Say, I made a downpayment of $100,000 and raised a mortgage for $600,000 the repayments would be around $2,800, plus around $400 property tax, plus maintenance of say $300 pcm = $3,500 pcm . This doesn't include the one-off cost of the property transfer tax which is significant.
Property transfer tax does not apply to first time purchasers. Mortgage payments depend on how much down you make. My kids new place is $300 a month less for mortgage over renting and at the end of the day its money in her pocket not a landlords.

Also depends on the approach you take to property ownership, financial, risk or emotional.
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Old Apr 18th 2012, 11:23 pm
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Default Re: Buying v/s Renting

Originally Posted by lwilli63 View Post
Hmmm, interesting a few posters have said it's cheaper to repay a mortgage than rent.

The house I currently rent is worth $700,000 and I rent two floors for $2,000 pcm. Say, I made a downpayment of $100,000 and raised a mortgage for $600,000 the repayments would be around $2,800, plus around $400 property tax, plus maintenance of say $300 pcm = $3,500 pcm . This doesn't include the one-off cost of the property transfer tax which is significant.
This is a Vancouver thing. Rental yields around here are brutal. The rule of thumb is that you look for an 8% yield, but that would mean getting $4,667 a month for a $700,000 house.

Some young people prefer to rent a home in Vancouver and buy in the interior where they can make a profit by renting to someone else. It gets you on the property ladder I suppose, but you don't get the capital gains exemption of a principal residence.
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Old Apr 18th 2012, 11:25 pm
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Default Re: Buying v/s Renting

Originally Posted by lwilli63 View Post
Hmmm, interesting a few posters have said it's cheaper to repay a mortgage than rent.

The house I currently rent is worth $700,000 and I rent two floors for $2,000 pcm. Say, I made a downpayment of $100,000 and raised a mortgage for $600,000 the repayments would be around $2,800, plus around $400 property tax, plus maintenance of say $300 pcm = $3,500 pcm . This doesn't include the one-off cost of the property transfer tax which is significant.
You haven't said how old you are or whether you plan to stay in Canada after retirement. I think this is relevant.

You said you owned something in the UK for 20 years, so perhaps you're 50-ish?

Will you still be able to afford $2000 pcm after you retire?
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Old Apr 18th 2012, 11:25 pm
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Default Re: Buying v/s Renting

Originally Posted by Aviator View Post
Property transfer tax does not apply to first time purchasers. Mortgage payments depend on how much down you make. My kids new place is $300 a month less for mortgage over renting and at the end of the day its money in her pocket not a landlords.

Also depends on the approach you take to property ownership, financial, risk or emotional.
Property tax DOES apply to first time buyers IF the propoerty is worth I think it is more than $300,000 and where I live you couldn't get a shack for that.

My approach to property ownership is purely financial. Of course mortgage payments depend on how much down payment you make and at the current mortgage rates I can make more by keeping my money invested in 20 yr UK Gilts and borrowing to the max.
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