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Buying v/s Renting

Buying v/s Renting

Old Apr 27th 2012, 5:23 pm
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Default Re: Buying v/s Renting

Originally Posted by HGerchikov View Post
The bottom line is, if you are buying a home to live in, and plan to stay there for several years, it is irrelevant if it is worth less sometime after you bought it than you paid for it as the value only matters when you convert it to cash when you sell. And, over the years, investment in real estate has proven to be relatively safe.

If, on the other hand, the cost of buying the house, maintenance, property taxes etc. results in a significantly greater monthly outgoing than renting and you are not sure how long you are going to stay in an area then there is a good argument for renting.
Exactly
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Old Apr 27th 2012, 5:53 pm
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Default Re: Buying v/s Renting

Originally Posted by Aviator View Post
However that quote you used is out of context and relates to a real estate investment company advertising their investment products for sale, they were not selling a specific house, but investments in real estate.
The context is the buying and selling of property in Canada. A business sector in which it's customary to stretch the truth to the absolute limit and to advertise falsely. To say that "false advertising is an offence" suggests that the technical truth of this claim has some bearing on the behaviour of people in the business. I suggest that it does not. I further suggest that the sentiment is hollow due to the lack of prosecutions.

If, of course, you can point to a list of jailed estate agents and directors of property companies, jailed for claiming you can be downtown in 20 minutes from Oakville, and the like, then I'll mellow in my position. As it is I think property is acknowledged to be one of those dodgy trades in which it's usual to peddle any sort of line to the punters. That's alright so long as everyone knows that it is.
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Old Apr 27th 2012, 6:06 pm
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Default Re: Buying v/s Renting

Originally Posted by Hawk13 View Post
Sure but let's use my parents house an example. They bought a house for $120K 30 years ago, price of gold was $40 an ounce so they could have bought 3000 ounces. Their house today is worth $280K, so a tidy sum of $160K. Today's price of gold is $1664 per ounce and that works out to almost $5million.

It all depends on where you buy, when you buy - nothing is a given as we may discover a planet made of solid gold and the price may plummet but I don't think so.

Aviator - one last thing, I think you mentioned that you are mortgage free. If that's the case, why? Why not take all the equity out of your house and buy a bunch of income properties, rent them out as they will more than cover their costs.

It's all about timing and risks.
Your math is a bit off, gold in 1982 was $376USD an ounce, $120000USD buys you 319oz. (3000oz would have cost just shy of $1m). The last time it was $40oz ($40.62) was in 1971, 41 years ago. Today it is $1664.13, which 319oz would yield $530857, not bad at all, but a long way off 5m.

If their house has only gone from $120 to $280k in 30 years, they must have overpaid or something drastic happened to affect the value. $120k for a house in 1982 was a big and expensive house. I bought a property around then, in rural SE England for $40,000 USD and sold 10 years later for something like $180000USD, today it is going for around $660000USD. My FIL bought a mansion in the SE for $120k in early 80s and he has it on the market right now for $5m.

Why don't I have rental properties, because I would have to deal with renters!
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Old Apr 27th 2012, 6:52 pm
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Default Re: Buying v/s Renting

Originally Posted by Hawk13 View Post
Aviator - one last thing, I think you mentioned that you are mortgage free. If that's the case, why? Why not take all the equity out of your house and buy a bunch of income properties, rent them out as they will more than cover their costs.

It's all about timing and risks.
Doesn't that depend upon the cost of purchase and the local rental market? The rent one could obtain for my property would not cover a mortgage for 50% of its value.

If posters on this board are to be believed, properties in Vancouver are very expensive but the rents are very low. How do you square that circle?
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Old Apr 27th 2012, 7:02 pm
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Default Re: Buying v/s Renting

Originally Posted by Aviator View Post
Your math is a bit off, gold in 1982 was $376USD an ounce, $120000USD buys you 319oz. (3000oz would have cost just shy of $1m). The last time it was $40oz ($40.62) was in 1971, 41 years ago. Today it is $1664.13, which 319oz would yield $530857, not bad at all, but a long way off 5m.

If their house has only gone from $120 to $280k in 30 years, they must have overpaid or something drastic happened to affect the value. $120k for a house in 1982 was a big and expensive house. I bought a property around then, in rural SE England for $40,000 USD and sold 10 years later for something like $180000USD, today it is going for around $660000USD. My FIL bought a mansion in the SE for $120k in early 80s and he has it on the market right now for $5m.

Why don't I have rental properties, because I would have to deal with renters!
Either way, gold, assuming they had the cash to purchase outright, does not keep the rain off your head. You still would have had to rent if you did not buy.
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Old Apr 27th 2012, 7:13 pm
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Default Re: Buying v/s Renting

Your math is a bit off, gold in 1982 was $376USD an ounce
Crap, your right I missed a decimal point but still not a bad return.

If their house has only gone from $120 to $280k in 30 years
Not all areas, especially in little communities in Canada, appreciate like London or Vancouver. You can still buy a house in Trail, BC for under $100K. And there are places in BC that your house is worth nothing if the local mill shuts down and you lose your job to boot.

Why don't I have rental properties, because I would have to deal with renters!
Haha - there is that to consider.

The rent one could obtain for my property would not cover a mortgage for 50% of its value
Exactly, depends on where you work and live.

Either way, gold, assuming they had the cash to purchase outright, does not keep the rain off your head. You still would have had to rent if you did not buy.
True, true but you're still missing the point, I'm being devil's advocate and trying to get people to think of all the the costs that are associated with owning a house unless you don't have any maintenance costs or yearly property taxes, etc.
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Old Apr 27th 2012, 9:38 pm
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Default Re: Buying v/s Renting

Originally Posted by Aviator View Post
http://www.investplusproperties.com/...ate_stock.html

As this investment firm states, let the renters pay your mortgage and build your wealth as a landlord.
We abide by this a little bit, and we're inbetween a number of posters on here. We rent out our house in London which allows us to pay off our mortgage and provide a profit of some sorts p/month (which the CRA taxes us on of course). We then rent out our house in Toronto. Ordinarily it would be foolish to keep paying rent to our landlord in Toronto for a long period of time, except for the fact that we're also having this done for us in the UK in parallel. We'll be done in 10 years - we're now at that lovely time where capital is coming down nicely.

If we bought the house we were in at the moment, our outgoings would rise (slightly) and without the rental income from the UK our standard of living would go down somewhat. We'd then be paying tonnes more interest to some bastard bank again for the next 8-10 years. When you buy anywhere, anytime you have to remember that the amount you actually 'invest' is comparable to renting (i.e. zilch) for the first 7-9 years of any mortgage. You are purely betting on property rise which, truthfully, will likely occur over that time. But, what will exchange rates be like in 2020 etc too?

It's a conundrum and I am sympathetic to the OP. I am literally schizophrenic on what we should do and go back and forth. It's probably not helping reading this thread either. Anyway, good luck!
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Old Apr 28th 2012, 2:07 am
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Default Re: Buying v/s Renting

Originally Posted by London Mike View Post
When you buy anywhere, anytime you have to remember that the amount you actually 'invest' is comparable to renting (i.e. zilch) for the first 7-9 years of any mortgage. You are purely betting on property rise which, truthfully, will likely occur over that time. But, what will exchange rates be like in 2020 etc too?
I sit on the fence re renting v buying having bought at least two properties that I have sold for less than I bought and having lived in a rental place where the rent was about a third of what I would have paid in a mortgage.

However, unless you have a very long term I don't think the zilch part holds. I took a mortgage of $321,000 under 3 years ago (got to love Toronto condo prices) and now seem to owe about $280K. I think I overpay a bit though. For me, at least this makes me 'save'. As for price rises, it might have gone up in value but any increase would be wiped out with the bastard realtor fees if I want to sell. 5% + HST, yeah right.
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Old Apr 28th 2012, 3:14 am
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Default Re: Buying v/s Renting

Originally Posted by lmartin999 View Post
I sit on the fence re renting v buying having bought at least two properties that I have sold for less than I bought and having lived in a rental place where the rent was about a third of what I would have paid in a mortgage.

However, unless you have a very long term I don't think the zilch part holds. I took a mortgage of $321,000 under 3 years ago (got to love Toronto condo prices) and now seem to owe about $280K. I think I overpay a bit though. For me, at least this makes me 'save'. As for price rises, it might have gone up in value but any increase would be wiped out with the bastard realtor fees if I want to sell. 5% + HST, yeah right.
Yes, of course zilch is an exaggeration. However its's interesting that you've 'made' $41k in 3 years on your condo. I wonder, had you rented and invested the difference in rent vs own over 3 years whether you'd have saved the same? Hard to say I guess.

I can think of a bastard realtor if you want one. He keeps writing to me and asking me to 'like' him on Facebook...

You swinging back the other way towards MBTTUK?
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Old Apr 28th 2012, 3:21 am
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Default Re: Buying v/s Renting

Originally Posted by London Mike View Post
Yes, of course zilch is an exaggeration. However its's interesting that you've 'made' $41k in 3 years on your condo. I wonder, had you rented and invested the difference in rent vs own over 3 years whether you'd have saved the same? Hard to say I guess.
Very hard, especially in a Toronto condo. But you've got to have a longer perspective, say 30 years, which might be the period between "getting on the ladder" and retirement.

I can think of a bastard realtor if you want one. He keeps writing to me and asking me to 'like' him on Facebook...
Simple solution. Stop using Facebook. HTH.
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Old Apr 28th 2012, 3:33 am
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Default Re: Buying v/s Renting

Originally Posted by London Mike View Post
Yes, of course zilch is an exaggeration. However its's interesting that you've 'made' $41k in 3 years on your condo. I wonder, had you rented and invested the difference in rent vs own over 3 years whether you'd have saved the same? Hard to say I guess.

I can think of a bastard realtor if you want one. He keeps writing to me and asking me to 'like' him on Facebook...

You swinging back the other way towards MBTTUK?
I suspect not much difference. For me the only difference is I have to make my mortgage payments whereas with savings I am so crap that I would probably have spent it on a Maserati or something.

Yes, I haven't liked him either. He is persistent, though I think they all are.....
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Old Apr 28th 2012, 3:46 am
  #102  
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Default Re: Buying v/s Renting

have to make my mortgage payments whereas with savings I am so crap that I would probably have spent it on a Maserati or something
We all do the "right" thing and make the mortgage payments. Show of hands - who really wants to spend it on the Maserati instead?

My hands way up.
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Old Jun 13th 2012, 4:04 pm
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Default Re: Buying v/s Renting

A friend sent me these - a little doom and gloom but an interesting perspective nonetheless.

http://www.youtube.com/watch?v=8_AyO...feature=relmfu

Part 2

http://www.youtube.com/watch?v=-7O9R...feature=fvwrel
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Old Jun 13th 2012, 4:25 pm
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Default Re: Buying v/s Renting

Anyone who thinks they know the definitive answer to this one is kidding themselves. Think about all the factors that could sway the balance one way or another:

- interest rates
- capital value of the house
- maintenance costs
- removal expenses (renters move more often than owner-occupiers)
- life expectancy of the renter
- insurance
- rental yields

Sometimes it's cheaper over the long run to be a renter, sometimes it isn't.
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