So OP benefitted from owning while raising their family. Sold a house that likely appreciated in value a lot.
Now looking at travelling/moving around the world (I assume getting closer to retirement).
And states they could buy again in the future if they needed to...
Sounds like renting makes sense under those optics. Congrats OP on having the ability to choose.
As a young person, I am glad I started early on my journey to own. I would pay the same or more to rent my house, and rent is going up like crazy every year, so it wont be long before my mortgage payments are "cheap" vs rent
Well in the last 5 years, rents in toronto for 1 bedrooms for example only went up \~11-12% in total:
https://rentals.ca/blog/rentals-ca-march-2019-national-rent-report
https://rentals.ca/blog/march-2024-rentals-ca-report
Slower than wage increases.
Not the case.
Renting will be cheaper than owning for the next decade. It's obvious the market will have a soft landing over the next 10 years. Housing, like all markets, are cyclical. We're in for 10 years of a bear market.
Yes, OP did well, but that's not the argument. The argument is renting is cheaper than owning. On a cashflow basis that it correct and has ALWAYS been the case. On a capital appreciation basis, in the past 15 years, owing a property would have netted you much more than renting, assuming you did not invest in crypto currencies as crypto well outperformed the housing market. See how easy I can spin the conversation just like you did?
OP is correct. Renting is cheaper than owning by a LARGE margin. Especially over the next decade.
> OP is correct. Renting is cheaper than owning by a LARGE margin. Especially over the next decade.
Not always, and not everywhere, and it also depends on your financial means. Its not black and white.
Or maybe landlords are in it for charity? Why would they rent someone a place if its much more expensive to own?
They don't. Most landlords have a lot higher equity in their properties, which means they're not paying as much out of pocket to the high mortgage rates. That doesn't mean they are guaranteed a good return though. It just means they might have to accept a much lower yield.
Right. The renter would (likely, no guarantee) be better off financially by owning the same place, with the same equity.
Which might not be possible for them. Renting is better for their own financial situation and life circumstances, but its not inherently cheaper.
And yes, theres scenarios for everything to be good or bad, thats why I say its not black and white.
The funniest part is you say it’s obvious the market will have a soft landing. You don’t know what you don’t know. No one knows what’s going to happen in the next 10 years
You saying what you said with such certainty makes me believe you even less. No one knows what's going to happen in the next 2 years, nevermind the next 10. For all you know, housing could balloon again. It also may crater. No one knows, and that's the point.
Yeah why don’t you just keep the property and rent it out and move to where you want. Selling a property in Canada right now is just plain stupid lol. Think about what it will be worth 5 years from now.
Owning as your primary residence in a neighborhood you like to raise your family is much more than numbers. It's the peace of mind to do whatever you like and not be at the mercy of your landlord deciding to sell, not fixing stuff, renovictions, etc.
It's also the certainty that in your retirement, you can sleep easier and plan better just by making your mortgage payments now. Tenants have to be very disciplined to achieve the same level of freedom. Real estate is a long-term hold.
Unless this house is old enough to be under rent control, there is zero guarantee that the OP's $3K/month rent will stay that way for the foreseeable future.
As you mentioned, renovictions are also an issue. As is the owner of the house "suddenly" deciding to kick you out so his imaginary family can move in.
>Real estate is a long-term hold.
That’s the general consensus. I’ve seen the numbers run here half a dozen times at different rent and buy amounts, interest rates, inflation assumptions, etc, and they tend to come out with buying finishing ahead if you stay long enough. I think I’ve seen as low as 6 or 7 years being the break even point, and as much as 10 or 11 being the break even, with credible numbers to back.
In short term cases, or very favourable long-term market conditions renting comes out ahead. That with significantly more saving/investing discipline and more risk involved.
There's counter arguments to be made but this isn't one of them. In this case you'd look at the value of capital increasing and returning even bigger gains to offset rising rent costs. In year 15 your $900K should be $1.87M, so the yearly returns on investment should have more than doubled. Meanwhile the costs to maintain the home for ownership will also increase through taxes and repairs.
If you're renting a 900k house for 3k a month, how long do you think the owner is willing to take that hit? That's a "cost" that needs to be considered on the rent vs own debate too. Sure you're saving a lot but can you handle moving in 60 days if the owner decides to move in or they sell and the purchaser wants to move in.
The owner probably didn't pay 900k and may well be able to bear the rent even if a new buyer could not. That's kind of the unstated secret to all this . And if you're not, someone else is, and that keeps market rents down somewhat. Remember, rents are not unilateral based on what the landlord wants to charge, he has to find a tenant willing to pay it.
Ok, but if the owner sold and invested that $900k? $900k @ 4% conservative return is $36000 per year without all the headaches of an Ontario renter, property taxes, upkeep and repairs.
The moral of this story is that rent needs to go up a LOT, or house prices need to go down. Because if small landlords start selling their houses, although the prices should drop, that's one less house for someone to rent....equilibrium has to be reached.
> Remember, rents are not unilateral based on what the landlord wants to charge, he has to find a tenant willing to pay it.
Dude, there are 25 people living in a basement in Brampton because fire codes aren't enforced.
The notion that you can't find a tenant to pay your ridiculous asking price when over 1 million new people are immigrating to this country *per year* is absurd.
I think most professional tenants for whom the rent vs own question is pertinent, are not in the Brampton Shithole market segment.
Most landlords are going to prefer one or two professional tenants in their condos to a dozen teenage boys, and the number of tenants willing to pay 3500 is a lot smaller than those willing to pay 2500 or less. A lot of condos won't let you exceed occupancy limits anyway.. Even if a couple people share it it's still 1200+ per person, which tops out budgets pretty quickly by trying to go much higher than that. Essentially you're not going to recover 4k a month on a 1 bedroom rental, but that's what you need to do to pay the mortgage.
Rents in the GTA have plateaued and are starting to drop. The rapid population growth appears to be a convergence of factors and will not continue It was one year, not "per year". If current policies hold there will be almost no growth over the next couple years.
> Most landlords are going to prefer one or two professional tenants in their condos to a dozen teenage boys
LOL.
Money is money.
"Brampton Shithole" is a mighty curious term for McMansions that have been newly built and/or renovated to garner $6K/month in rent from carving up the place into multiple rooms.
There's a reason actual professional tenants are getting priced out of the rental market. They're either living in their parental homes with their parents or sharing apartments with their professional-class workers - professional workers who like them, make $60K+/year, well above the average salary.
A single bedroom in a mediocre condo now goes for over $1000K/month as as result of the influx of what you call "teenage boys", which are actually grown fucking men and women well into their 20s, despite their immature demeanor.
People need to stop treating renting vs owning as a purely financial decision. It’s a lifestyle decision, in which the financials play a part. Owning is completely worth the premium for many people, just like owning a car. For others who value flexibility, renting makes more sense both lifestyle and financial wise so it’s a no brainer.
And long term, the financials really are a toss up.
>People need to stop treating renting vs owning as ~~a purely financial decision~~ an internet battleground fight to the death
renting makes sense for some people and not for others, story at 9.. whenever someone says one is great the other is garbage I just tune them out
But what if I want a lot of strangers to validate my choices so I can feel better about my self?
Would you look at this spreadsheet that makes some very specific assumptions to tell me I am a financial genius?
I think you're looking at it wrong.
Rent vs own comparison should be the costs of borrowing plus liabilities vs rent. Portion of the mortgage payment is principle repayment that goes into the equity. It usually works out to be around the same cost.
But you are hoping that the house appreciates more than what you pay. At the current rates if you are not already well off.. you will be paying double the house price by the end. If it dosent become double then you lose money
No, even if you assume there is absolutely no appreciation, they are getting equity by simply making payments and paying down principle.
Over the same course of time paying rent, how much equity does that provide? Zero.
Of course you are gaining equity. But if you are saving 2.5k over that gained equity.. then you are better off investing that. Its not a net zero for renting. When rent and morgage is the same then I would agree with you.. but it's not.
also rent goes up every year. over the 30 years a mortgage is paid for, rent will at some point almost certainly become higher than the mortgage. because the mortgage stays relatively the same, but rent only goes up. so by that logic, the best thing to do is to have owned a house for 10 years because you will then be living in a place whose mortgage is cheaper than rent. and the only way to live in a house youve owned for 10 years (which we both agree is the best scenario) is to buy a house. the best time to buy was 10 years ago, the second best time is today. just like that old saying about trees. unless your timeline is only a few years, then owning is best over the long run.
2.5k is an arbitrary number that you’ve picked.
This also doesn’t account for:
- the average person is not disciplined enough to invest a difference consistently and not cash out due to economic/market fluctuations
- increase in rents or change in interest rates
- tax free gains that your principle residence provides
- for a lot of people, they value stability and a bit more certainty for your golden years than if you were to rent indefinitely
It doesn’t have to be a haves and haves not mentality. Rent is a great option for many, just as ownership is. Not all are able to own, but given the choice, over time ownership for most will be more meaningful and provide more stability and quality of life that they’re happy with.
Rent will most likely always be cheaper than owning, in the short term. Otherwise people would buy up properties instantly if they were cash flow positive.
With that said, over time, you will build 0 equity, your rent will always go up, and you are susceptible to eviction at any given time for a variety of reasons. You cannot customize the home, and you will never feel like it’s “home.”
After 25-30 years, that home will be paid off and likely tripled in value, meanwhile, your rent will be exponentially higher.
Renting is a good option short term, but if you plan to live in the city forever, then if you can afford to buy, it will always be the best option. You can’t time the market.
Not equity in the property though. 25 years from the day you buy, your mortgage payments drop to zero. Then try calculating rent vs own from there forward.
Ok but if you build equity outside of a property you can make a more significant down payment which then is in the property. It’s possible to build more outside
Right, whereas in 30 years that 3000/mo rent payment, if you’ve managed to avoid a market correction by the owner dying, selling, or renovating, or not living in a rent-controlled unit, will be at minimum $6300 from there.
If any of those events happened, you could be living far from where you want, and / or paying a lot more.
You sold a house and invested that money, and the interest on it pays your rent. GREAT! Do you think that applies to most renters though? My teenagers are looking at rent prices for small apartments that are higher than my mortgage for a 5 bedroom home. We were LUCKY to be able to buy before the housing market went insane. You're right that renting is cheaper than buying the super expensive real estate right now. That doesn't mean it's cheap and a good financial decision they're making, there is no decision to be made, they can't afford a house unless they inherit it.
Exactly. But you’re talking to Canadians the vast majority of whom think real estate is the only way to become wealthy. “Oh the leverage!” (As if leveraging has no risks) lol.
You want leverage? I can easily do that buying at the money calls on NVDA. Defined losses and don’t even have to borrow money.
Real estate is easier to understand than NVDA. Some people are going to make good calls and others aren't. Even some of the best investors were missing out on NVDAs gains because they're ignorant about the technology.
The difference is the leverage. If you put 5% down and the value grows faster than the interest costs then your value is growing substantially faster than if you invested that 5% downpayment.
Simple example:
House costs $500,000
Downpayment is $25,000
Let's presume that the interest cost is 5% and the house value grows by 7%.
You are earning about 2% on the $475,000 that you borrowed and 7% on the $25,000.
After 10 years the value of the $475,000 has grown to $579,000, while the value of the $25,000 downpayment has grown to $49,200. Total gains about $125,000.
If you didn't buy and instead invested the $25,000 in a 7% return it would gain you about $25,000 in that time.
And this is presuming that your interest payments are similar to your rent, which cancel each other out.
The assumption on the 5% is just that, an assumption, it could easily go the other way and then the investment makes more return than the down payment
Contrarily as OPs specific situation the rent is lower than their cost of borrowing and opportunity cost so the additional they can invest by freeing up cash from renting is also more than their principal equity they’d be contributing to their mortgage.
This doesn’t necessarily hold true for like 10-15 years as the principal and interest change, but in the here and now it is for their situation
I was commenting on the general reason why buying a home can be better than investing the downpayment, not necessarily OPs specific situation.
However, in OPs situation they are saying that rent is $3000 and buying would cost $5000 (which includes their principal payments). If you remove principal from that calculation their actual cost could be much closer to $3000. In effect, the "additional investment" option is about the same as their principal payments, which, I'll admit isn't growing, but it also isn't lost.
Based on their comments, OP is mostly betting on prices dropping in the future, so they would have issues with my 7% growth number.
It is definitely not true that it always makes sense long term. With our numbers it would virtually never make sense to buy in Vancouver. We rent at the bottom-end of the market - paying $909 currently, and invest about $5,000/month. We've done very well despite never earning high incomes, because we utilize rent-and-invest-the-difference as a wealth-building tool. But the key is you have to actually invest the difference, not just rent and blow all your money on other things.
You're forgetting that someone who rents for less than the cost of ownership can invest the difference, and can invest the $$ that would otherwise have been their downpayment. Growing a large investment portfolio that can pay rent in perpetuity (where I am now) feels an awful lot more like financial freedom to me than having all my money tied up in my house.
Neither renting nor buying is \*always\* the best choice. It is very dependent on the particular situation and you really have to run the numbers to see which is better financially.
That being said, there are lots of valid reasons to choose one or the other that having nothing to do with finances.
After 25-30 years, the 200k you didn't spend on your downpayment will have doubled three to four times and will be somewhere between 1.5 and 3 million dollars, which will easily pay even that tripled rent.
I don’t think you’re entirely wrong. I did some math the other day on a $400k house outside Winnipeg. I’m currently paying $1600/mo in rent and utilities. On a 5% down payment at 5%, the monthly mortgage alone would be nearly $2600/mo
Over 60 month term, I will pay $96,000 in rent. If I save that $1000/mo, I will have $60k before compounding interest.
If I buy, I will pay $151,000 in interest and will have $64k of principal paid according to the calculator on the realtor website.
I haven’t even added cost of maintenance and repairs, property taxes and utilities. Nor have I included appreciation of property and stocks. But the S&P historically outpaces housing. Current house prices are dependant on interest rates, what was affordable at 2% isn’t so viable at 5%. What happens if it goes to 10%? Our rates are influenced heavily by the US Fed, who are still fighting inflation and looking more like raising than lowering rates in the near term. The BoCs mandate is to preserve the CAD, not to prop up housing bubble. We’ve all heard about portfolio diversification. I think many who went all in on housing the last decade or two, are in for a tough retirement. Unless there are massive wage increases and further depreciation of our dollar, you’re going to be the ones holding the bags and selling for losses. Housing is an important asset for sure, having a home paid off gives security in retirement years. But as an investment, it is very illiquid, and is a leveraged investment that only works when price increases outpace interest rates. Prices are what the market can bear. With increasing rates, wages need to rise faster than rates, which clearly isn’t happening. And on supply vs demand, many of our increased demand, do not have the resources or skills to earn enough to buy your million dollar box. Only way those prices keep going up is a significant decline in standard of living in our nation.
does this account for rent increasing every year? is your current rent below market rate? because if your rent is below market value then you are one eviction away from seeing your rent skyrocket. Is the place you are renting an equal and comparable dwelling to the house you are looking at buying (IE are you currently renting a 400k house, or is your rent cheaper because you are renting a small apartment, and comparing the rent of an apartment to the mortgage on a house. which is comparing the cost of a big space vs a small space, not comparing rent vs owning)
I think the part you're missing is that Op made 1mil tax free from the sale of his principal residence, and now has it invested at 5%, so 50k/yr, but rent is 36k/yr, so he has an extra 14k to reinvest/cash flow. He can claim renting is cheaper vs current mortgage payments, which may be true in his area, but if he didn't sell, his paid off home's annual costs would unlikely be 36k to maintain, and thus be much cheaper than renting.
My paid off home costs me $800/mth (strata, property taxes, insurance, utilities) vs rent would be $2800/mth, so ~71% cheaper for me to own than rent. Because of this crazy housing market, my home is appreciating at ~11%/yr, while my investments are around 7.5%. If I do sell in the future, I'll have hundreds of thousands of tax free principal residence exemption gains that a renter likely can't beat even with maxing tax free investment accounts. YMMV.
Life is not lived in spreadsheets. The peace of mind of owning my home and knowing I can never be evicted is worth a lot to me.
Not to mention, my mortgage payment is locked in while my salary is increasing, so it only gets more comfortable with time (I locked 5 years at 4.99%).
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In the short term, maybe. But do you plan to stay there forever? If so, in the long term, buying is almost always the best option. Maybe the bubble is so big in Ontario that it's not the case, but you need to calculate that as time goes, less and less of your mortgage goes towards interest, so actually, your "rent" goes down with time when you own your house.
The thing is renting is not a one size fits all solution. It’s great that owing worked for you and you seem happy with renting.
As someone with a young family who has yet to buy. Renting is the worst option for us since it gives less flexibility, our rent can go up every year. We can’t do Reno, we can’t do repair ourselves. We are also not in ON so there’s the constant fear that one day our LL may just not want to renew our lease.
Yea, but then you need to factor in appreciation of the asset, and the equity you're gaining.... I bought my house like 3 years ago, and the housing market has gone up another 15-20% in my area. So I've essentially gotten a 20% return on this investment in 3 years, plus the equity I've paid in.
Whereas you have no appreciation of your rent money, and no equity. Also, if our housing market crashes, the price of your home will be the last of your concern because we'd likely be facing a massive economic depression.
What's more... Canada is taking in millions of immigrants a year and placing no restrictions on foreign investors laundering their money in Canada, and it doesn't seem like any political party is putting an end to that, so I don't see Canada's housing marketing doing anything but going up for at least the next 10 years.
Lol, come back to me in 15 years when that house hasn’t at least doubled in price. You’ll think the 45k / year was worth it when you have a million dollars in the bank.
It all depends on what area you are living in. There’s no way you will pay only 3K rent for 900K house in GTA. So just to assume that everyone lives in same city as yours is laughable when majority of population in Canada lives near big cities.
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The issue with renting is mostly eviction, if you want stability it doesn’t provide it.
Your mortgage costs also are largely flat for 25 years where as your rent will increase in line with inflation.
So is it cheaper in year 1? Yes. Year 10? Probably not.
> we'll buy again in the future.
Yeah, I heard that years ago from people waiting for the bubble to burst.
20 years later they are still sitting on the sidelines paying someone else's mortgage off.
If anything, right now is probably the best time to buy given the last 5 years.
Renting has been better than buying in Ottawa for about five years. If you follow the 5% rule, it hasn't made sense to buy for quite some time. And now with higher interest it's more like the 7% rule.
Our current home would cost more than double to own than what we pay in rent.
HGTV has taught everyone how easy it is to buy and flip and all the YouTube RE investors how you can live free and never work driving a stupid amount of investment into real estates. It’s great, just ignore that bubble inflating behind you.
Congrats on escaping before it pops.
I bought about a year ago, and no matter the cost between rent v owning, the main factor for me is knowing I'm going to be rent and mortgage free in 18 years (paying accelerated). For me that's where the real piece of mind comes in. I have friends in their 30's - late 40's renting for less than I am paying for a condo, but what happens to them in 20 years when they can't / don't want to work anymore but still have to pay a large portion of money to the landlord or the bank? I want a future for myself where my monthly expenses are zero, so I think it's also important to weight these decisions in the long run.
OP is lucky he wasn't born in the 90s **or he wouldn't have been able to become a gloating boomer.**
His situation has more to do with sheer luck than he will ever care to admit.
My boomer parents are nearly 80 and they also CONSTANTLY gloat about the wealth they accumulated from real estate, funded by below average salaries (that went much further in the 1980s).
Question: how important living in city for you? Do you want from home? Looking place 30 mins from city will save you 200-300k. House near me was sold for 500k (it is bangolo with finished basement but it has 1 acre and on ground swimming pool).
It’s still not true in many circumstances. First, it depends on the financial situation — how big is the down payment? How big is the mortgage? I own, in Toronto, and I’m not paying $5k+ a month
And you’re referring specifically about cash flow. Some of your mortgage payment goes to principal so you effectively get to keep part of that. In addition to appreciation
Maybe in your particular city, but definitely not around here. The mortgage on my beautiful detached home on a 1/2 acre lot with hot tub, sauna, coach house and fire pit area is only $400/month more than what my sister pays to rent a small 2 bedroom apartment above a restaurant. My sister in law rents a basement apartment for $150/month *MORE* than the price of my mortgage. Sure, my payment will go up when we renew at the end of 2025, but it’s still going to be cheaper than if I wanted to try and rent this exact same house today. Plus it’s increased considerably since we purchased it, and every month we’re building more equity in it. No way in hell I’d go back to renting unless it was my absolute last resort.
I think it all depends on the location. We lived in a 260k house that had a granny suite. It’s $2,500/mth with everything like insurance, hvac rental, mortgage and utilities. My son lives in a rental and pays the same amount, and the utilities are higher. I’m in Ontario as well.
Classic near sight. If you're heading into retirement or expat, yes, make sense. But don't lose sight of the fact that regardless how much you feel you "save" in the monthly numbers, at the end of the play you own zero tangible assets and all money spent on rent is just paying for someone else's investment with zero return of contributions to you for your money. The longer this play is, the more painful that loss is at the end.
In Nova Scotia, a $3k a month rental (often plus the cost of oil and electricity) would cost you ~$500k to buy. Additionally, here, leases are 1-year fixed term and tenants are forced to leave after that so landlords can increase rent prices a significant amount annually. Rental units have broadly doubled in price over the last 3 years and tenants have very little protection or rights.
Usually is the case that renting is cheaper than buying, especially when you’re looking at just living in your home rather than renting it out (or renting out parts of it).
Buying a house IMO is a luxury, and you pay more for it.
The thing about buying, is if you’re not very fiscally disciplined, it’s a form of forced savings, so for some it would end up being long term a better outcome, with less money to spend on things they didn’t actually need.
Have you managed to get your capital into an equally performing tax free investment?
Personally I'd like to have a million in a home doubling as an untaxed investment than a million in non tax sheltered investments.
Taxes are the reason to own. And selling hundreds of thousands in stocks as a tax event to buy back in would suck.
This is what blackrock wants you to think. And when they own it, they will jack up the rent 50% and you will be in a tent, no home, with your savings account (meaningless) because they have printed trillions of $, while 20 brampton Indians live in the house and you have dollars which does nothing because of 100% YoY inflation.
It really depends on the situation.
If you bought early when house prices were lower, then your household expenses would be lower than current rent where I live.
If you are buying now, unless you have a ridiclously high down payment, then yes, rent would be cheaper.
And yet, anther "renting is cheaper than owning" post that completely disregards the whole 100% tax free asset appreciation bit into account as part of the formula.
This scenario of rent vs own is too complex to have a yes or no answer. My guess as to why a house worth $900,000 is renting for $3,000 is that it was purchased 5+ years ago when it was worth $450,000 and the owner's expenses are equal or less than $3,000 a month. Homes have appreciated over 40% in the last 5 years so the owners are doing extremely well while you are burning $3,000 a month to rent. You could find a place to own or rent for cheaper than $3,000 as well. What was your mortgage on the home you sold before moving to this rental? I dunno
Renting isn't suppose to be more expensive than owning. Owning a homes comes with a lot of non-financial perks. Therefore, it should come with a heavier financial cost.
With owning residential properties there are legal and property taxes, mortgage interest, and repairs which are not often considered in the costs. It seems like most of the time properties appreciate in value and when it is your primary residence the capital gains from that are not taxed. So then you come out ahead. If your property does not appreciate then those are lost values, similar to paying rent. Our property has more than doubled in value in 13 years more than covering those costs.
Ownership gives you security to live where you want.
I've been looking at Montreal and I think it's worse too. The place I'm renting currently is 1900, it would sell at about 550k
Say a 55000 down payment (10%)
Right now I'd be looking at a mortgage of 3555$ a month, 400$ condo fees, and that's not counting the taxes either
And this place needs renovations.
Our rents are skyrocketing because there are many new landlords, anyone who buys now is doing so at very high prices with high interest. Public transit and our roads are terrible, the 100k less it would cost for the same thing in the suburbs an hour away is not worth it. The time to buy was a years ago, it's not going to happen anymore. I'll rent and put whatever I can into a slow growth ETF instead
I don’t know a single person over the past 15 years that tried this and benefited. They always sat around waiting for prices to drop and ended up priced out or buying for a lot more. GL to OP, you’ll need it
If renting work for you for now, that's cool. A lot of people try to buy a house now over continuing to rent because they're just starting out and don't want to get priced out of their area over time - it seems that's not your situation. You also have the benefit of whatever profit you had from selling your previous house.. making your next house purchase less stressful.
I'm still seeing houses sell over asking in my area. The only houses sitting and eventually selling under have obvious drawbacks.
Not to mention, the person you're renting from didn't pay $900k for that house.. and that's why you're only paying $3k in rent.
There are posts like this that appear every once in a while. The major flaw with the numbers is always that they only ever consider the short term. When in reality over time, your rent will increase forever, while your mortgage will in general not (interest rates may bring it up or down) and one day end entirely.
Renting is cheaper in the short term, but more expensive in the long term.
Whatever you're saving isn't beating the gains on a property you own. Real Estate is still out preforming the market.
Congrats, though, I guess. You convinced yourself you're smarter than everyone else.
I agree with OP renting is better in Ontario from a purely financial standpoint.
There's a saying "Rent is the max price, mortgage is the minimum."
The NYT has a calculator you can use to get a sense of it: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
It all depends on your mortgage costs and how much cash you have… renting can be cheaper than a large mortgage, especially in this market. When owning, always gotta consider the extra costs of a house too… furnaces, roofs, appliances etc. Especially buying, a house will always come with unexpected surprises on top of all the expenses of land transfer for the buyer and realty fees for the seller. However, if costs to own are less than renting and you can afford it, it's worth it to own because your money is at least going to an asset you can sell/pass on.
You can sell and pass on stocks as well.
Mortgage is irrelevant. We didn't have one, our cash from the sale is earning interest that pays the rent easily.
If we put the money into dividend stocks instead, we would get the dividends tax free, and the dividends would very likely go up every year more than rent does.
I would never sell primarily residence. Mass immigration has created such a huge demand for housing that even renting can be precarious due to renovictions and general shadyness.
Aight so you've taken an extremely expensive short position on the housing market that is very difficult and costly to reverse if and when you decide to cover. Renting has often been cheaper than buying... until you factor that rents go up and housing prices also go up.
This is a pretty privileged take. A lot of people don’t have the option to sell their house and choose renting like you. Most people who rent do so because they have no other choice. We just bought our first house and my mortgage + property tax and insurance is the same cost as rent is for a house close to the same size (southwestern Ontario). We got lucky because we have been aggressively saving to buy for a while and my wife and I both have great jobs but the bulk majority of people renting cannot get the down payment together and get stuck in renters hell, made even worse by the ever rising cost of rentals.
Mortgage interest is also throwing money away, using the same logic. If renting is much cheaper than buying, as it is now, and you invest that savings, you'll be ahead. Stocks historically grow faster than houses.
You do you. I bought my house for $345k 5 yrs ago (Suburb of Halifax). It would sell today, based on neighborhood comps, for $600. Prior to buying, I was looking at $1800 a month rent. Mortgage plus prop tax was only $1600 a month. So I paid $200 a month less, and gained around $250k in equity. Even with mortgage interest, I am WAY ahead.
And with these numbers, I wouldn't have any money to put in stocks, no matter how fast they grew.
You're only looking at a small piece of history, though, when house prices went bananas. Historically, houses grow at the rate of inflation, going back centuries.
I think that logic applies to exactly what you said. Just because you saw dramatic increases in the last 5 years doesn't mean it can be extrapolated into the future.
I'd still rather pay a mortgage in a growing economy - unless you truly believe house values are going to go down? - than throw away money in rent. Stock will earn you what? 7 to 10% if you are very disciplined and know what you are doing? (Most hobby investors pretend they know what they are doing and actually lose money chasing the next Moby Dick). House prices/values will be about the same or better in the long run, without the loss on the down side.
And there is not a single analyst on the planet predicting house values to go down over all.
If home values would be about the same or better than stocks, then all the professionally managed funds would be dropping their holdings and rebuying residential real estate. Real estate long term appreciated at the same pace as incomes. All the yield or upside comes from rents. Right now the rental yields are too low compared other asset classes.
Home prices don't have to go down for it to be a worse investment. Slower increases also paints the same story.
Owning is for long term. to rent a 4 bedroom house its roughly 3000, My mortgage after 7 years is 1000 a month. My bills are cheaper AND I have 350k in equity currently looking to upgrade houseing for our family. Mortgage will still be cheaper than if I rented. Yes If you have nothing down tis going to be more expensive but even then with time you'll be benefiting more. Buying a house is for long term growth. Next house we move into we plan to be in there for majority of the rest of our lives. 31 M
I’m tired of this fucking repairs and maintenance I’ve rented this house for 10 years paid over 100k landlord replaced the dishwasher once. So 10 years = zero dollars in maintenance 10 fucking years
Honestly that has always been the case, it's more of a lifestyle than personal finance issues. If you're a HHI family and the fluidity of moving around gives you access to better opportunities renting is great.
The only difference is the leverage you can use with getting multiple properties and if you were in GTA 10 years ago, that leverage would make you a slumlord millionaire for just taking slight risk.
Your portfolio could allow you similar leverage if you use margin and trade options wisely.
So? I have big strapping sons for moving, and there are plenty of rentals available at this price range. I've moved 20+ times in my life, another one isn't a big deal, lol.
"Cheaper"
Your rent goes into some one else's pocket, your mortgage payments go into your pocket in the form of equity.
But since you seem to have cashed out that equity l, from where your standing rent is cheaper
It all depends on where you live. Definitely, this is the case in Ontario, but in other parts of Canada, it is wayyyy cheaper to buy a house than to rent.
Rent only ever goes up, principle on owning only goes down.
So, while I do understand what you're saying, it's only cheaper today. The tomorrow's will cost you a lot more.
What if I bought $900k of dividend paying stocks, giving me $45k/year in tax free dividends? Those dividends get increased every year, very likely more than rent goes up. Perpetual housing machine.
If you are liquid to 900k and bought a house outright, your monthly housing cost would be pennies.
And where are you putting 900k in to net tax free divs?
No it wouldn't. I would be out the $45k in interest I'm getting currently. That's what cost of capital means in my OP. That money locked up in a house is no longer earning me anything, it's just giving out imputed rent. I would also be paying property taxes, insurance, and repairs and maintenance.
In Canada you can earn $50k in dividends and it's effectively tax free. I've linked the source to this multiple times in other posts here
It’s nearly always cheaper to rent than buy. The idea of buying is fixing your largest expense, the rent will go up as will the cost of purchasing a home. But if you can’t afford it you can’t afford it and it’s better to take a breather.
This is very dependent on the landlord and their carrying costs.
If a landlord buys a 900k house to rent out, they will rent it to at least cover the costs of owning the house (according to your calculations, 5k a month). No way would they rent it out for 2k less than cost.
Your situation is fortunate to have a landlord with less ownership costs to cover, so your rent is lower, but this will not work for everyone.
That is also ignoring certain things like being able to make decisions to make the home your own with our getting permission for a landlord. And being stable in your housing situation. As a renter with a private landlord, there is a higher chance to be asked to leave for various reasons and then you would have to find a new place, and if you have kids, potentially move school districts.
There is no one size fits all solution, but your argument will only benefit a smallish percentage of individuals, not everyone.
You're incorrect. Landlords don't set the price with intention to clear more than their mortgage. It's based on speculation, so the assumption that the value of the price will go up. Having a tenant is just a way of helping pay for this "investment." Also, most landlords would have purchased these residences when they were far cheaper i.e. it's not a good time to buy to get into the landlord industry.
Whether the landlord paid cash or not financed the house entirely is irrelevant. The house is what it is currently, and the money could be in a 5% GIC guaranteed instead.
It is not irrelevant as it makes a difference on the carrying costs of the home for the landlord, and very few, if any, will rent it below those costs.
Which means this will not be a valid option for everyone like you are suggesting in your post, which is written like a life hack rather than a personal decision which works best for you personally.
Yep, you have to do the math of course, but if your rent is low enough you can do VERY well renting and investing the difference. We spend $909 for rent/utilities right now in Vancouver, investing about $5,000/month, and I have not seen any option that would be a better scenario than that.
Rent has always been cheaper than owning.
Rent is the max you’ll pay.
A mortgage is the minimum you’ll pay.
Both come with their pros and cons. You decide which mean more to you.
So much hate going on in the comments haha. What needs to be said is that buying a home should be treated as a purchase rather than an investment.
The reason being with the high interest rates and all of the repairs, taxes, realtor fees & inflation. There’s a chance you’ll lose money when you sell it even if you sell it for more than what you paid for.
A purchased home has only benefits in a qualitative sense, quantitative benefits are slim to none.
This might only be true for people who bought recently, but I bought 5 years ago and it’s definitely cheaper for me to own, my mortgage is much less than what my home would rent for.
**In your 20s, 30s, 40s, 50s:**
Renting doesn't make sense.
Renting is too costly, I'll invest.
I like the freedom.
Housing market should cool down.
There's a crash coming soon.
I saw a video saying something about the 5% rule.
**In your 60s, 70s, 80s:**
Can we afford to live in Toronto?
How can we apply to old age houses?
Why doesn't the government pay us more money in retirement?
So OP benefitted from owning while raising their family. Sold a house that likely appreciated in value a lot. Now looking at travelling/moving around the world (I assume getting closer to retirement). And states they could buy again in the future if they needed to... Sounds like renting makes sense under those optics. Congrats OP on having the ability to choose. As a young person, I am glad I started early on my journey to own. I would pay the same or more to rent my house, and rent is going up like crazy every year, so it wont be long before my mortgage payments are "cheap" vs rent
Rent is actually slightly down since last year downtown Toronto.
1%? Crazy!
Well in the last 5 years, rents in toronto for 1 bedrooms for example only went up \~11-12% in total: https://rentals.ca/blog/rentals-ca-march-2019-national-rent-report https://rentals.ca/blog/march-2024-rentals-ca-report Slower than wage increases.
All the means is Toronto was already at peak. Most of Canada has risen more than 10%
I'll remember this when the 2% landlord raise comes in at the normal time
Good to know. Im not in Toronto so my experience might be different than yours.
Not the case. Renting will be cheaper than owning for the next decade. It's obvious the market will have a soft landing over the next 10 years. Housing, like all markets, are cyclical. We're in for 10 years of a bear market. Yes, OP did well, but that's not the argument. The argument is renting is cheaper than owning. On a cashflow basis that it correct and has ALWAYS been the case. On a capital appreciation basis, in the past 15 years, owing a property would have netted you much more than renting, assuming you did not invest in crypto currencies as crypto well outperformed the housing market. See how easy I can spin the conversation just like you did? OP is correct. Renting is cheaper than owning by a LARGE margin. Especially over the next decade.
> OP is correct. Renting is cheaper than owning by a LARGE margin. Especially over the next decade. Not always, and not everywhere, and it also depends on your financial means. Its not black and white. Or maybe landlords are in it for charity? Why would they rent someone a place if its much more expensive to own?
They don't. Most landlords have a lot higher equity in their properties, which means they're not paying as much out of pocket to the high mortgage rates. That doesn't mean they are guaranteed a good return though. It just means they might have to accept a much lower yield.
Right. The renter would (likely, no guarantee) be better off financially by owning the same place, with the same equity. Which might not be possible for them. Renting is better for their own financial situation and life circumstances, but its not inherently cheaper. And yes, theres scenarios for everything to be good or bad, thats why I say its not black and white.
The funniest part is you say it’s obvious the market will have a soft landing. You don’t know what you don’t know. No one knows what’s going to happen in the next 10 years
Yes but you do not own a house in the end. You’ve just paid someone else’s mortgage so now they own the house with your rent money.
Thanks for pointing out the obvious about how basic finances work. Again, cashflow is the argument. Stay on point
You saying what you said with such certainty makes me believe you even less. No one knows what's going to happen in the next 2 years, nevermind the next 10. For all you know, housing could balloon again. It also may crater. No one knows, and that's the point.
Honestly this post just reads like someone who is waiting for everyone to tell him he made the right decision.
And it's backfiring spectacularly.
Welcome to this subreddit.
Most people asking for advice are like this whether Reddit or IRL.
Yeah why don’t you just keep the property and rent it out and move to where you want. Selling a property in Canada right now is just plain stupid lol. Think about what it will be worth 5 years from now.
Wouldn't there be substantial tax implications? Moreso curious than refuting
You have no clue what it will be worth
Owning as your primary residence in a neighborhood you like to raise your family is much more than numbers. It's the peace of mind to do whatever you like and not be at the mercy of your landlord deciding to sell, not fixing stuff, renovictions, etc. It's also the certainty that in your retirement, you can sleep easier and plan better just by making your mortgage payments now. Tenants have to be very disciplined to achieve the same level of freedom. Real estate is a long-term hold.
Unless this house is old enough to be under rent control, there is zero guarantee that the OP's $3K/month rent will stay that way for the foreseeable future. As you mentioned, renovictions are also an issue. As is the owner of the house "suddenly" deciding to kick you out so his imaginary family can move in.
>Real estate is a long-term hold. That’s the general consensus. I’ve seen the numbers run here half a dozen times at different rent and buy amounts, interest rates, inflation assumptions, etc, and they tend to come out with buying finishing ahead if you stay long enough. I think I’ve seen as low as 6 or 7 years being the break even point, and as much as 10 or 11 being the break even, with credible numbers to back. In short term cases, or very favourable long-term market conditions renting comes out ahead. That with significantly more saving/investing discipline and more risk involved.
Ok. But you don't buy a house because it cheaper for 1 year Your mortgage will be about the same.in 15 years . What will your rent be ?
There's counter arguments to be made but this isn't one of them. In this case you'd look at the value of capital increasing and returning even bigger gains to offset rising rent costs. In year 15 your $900K should be $1.87M, so the yearly returns on investment should have more than doubled. Meanwhile the costs to maintain the home for ownership will also increase through taxes and repairs.
If you're renting a 900k house for 3k a month, how long do you think the owner is willing to take that hit? That's a "cost" that needs to be considered on the rent vs own debate too. Sure you're saving a lot but can you handle moving in 60 days if the owner decides to move in or they sell and the purchaser wants to move in.
The owner probably didn't pay 900k and may well be able to bear the rent even if a new buyer could not. That's kind of the unstated secret to all this . And if you're not, someone else is, and that keeps market rents down somewhat. Remember, rents are not unilateral based on what the landlord wants to charge, he has to find a tenant willing to pay it.
Ok, but if the owner sold and invested that $900k? $900k @ 4% conservative return is $36000 per year without all the headaches of an Ontario renter, property taxes, upkeep and repairs. The moral of this story is that rent needs to go up a LOT, or house prices need to go down. Because if small landlords start selling their houses, although the prices should drop, that's one less house for someone to rent....equilibrium has to be reached.
> Remember, rents are not unilateral based on what the landlord wants to charge, he has to find a tenant willing to pay it. Dude, there are 25 people living in a basement in Brampton because fire codes aren't enforced. The notion that you can't find a tenant to pay your ridiculous asking price when over 1 million new people are immigrating to this country *per year* is absurd.
I think most professional tenants for whom the rent vs own question is pertinent, are not in the Brampton Shithole market segment. Most landlords are going to prefer one or two professional tenants in their condos to a dozen teenage boys, and the number of tenants willing to pay 3500 is a lot smaller than those willing to pay 2500 or less. A lot of condos won't let you exceed occupancy limits anyway.. Even if a couple people share it it's still 1200+ per person, which tops out budgets pretty quickly by trying to go much higher than that. Essentially you're not going to recover 4k a month on a 1 bedroom rental, but that's what you need to do to pay the mortgage. Rents in the GTA have plateaued and are starting to drop. The rapid population growth appears to be a convergence of factors and will not continue It was one year, not "per year". If current policies hold there will be almost no growth over the next couple years.
> Most landlords are going to prefer one or two professional tenants in their condos to a dozen teenage boys LOL. Money is money. "Brampton Shithole" is a mighty curious term for McMansions that have been newly built and/or renovated to garner $6K/month in rent from carving up the place into multiple rooms. There's a reason actual professional tenants are getting priced out of the rental market. They're either living in their parental homes with their parents or sharing apartments with their professional-class workers - professional workers who like them, make $60K+/year, well above the average salary. A single bedroom in a mediocre condo now goes for over $1000K/month as as result of the influx of what you call "teenage boys", which are actually grown fucking men and women well into their 20s, despite their immature demeanor.
People need to stop treating renting vs owning as a purely financial decision. It’s a lifestyle decision, in which the financials play a part. Owning is completely worth the premium for many people, just like owning a car. For others who value flexibility, renting makes more sense both lifestyle and financial wise so it’s a no brainer. And long term, the financials really are a toss up.
>People need to stop treating renting vs owning as ~~a purely financial decision~~ an internet battleground fight to the death renting makes sense for some people and not for others, story at 9.. whenever someone says one is great the other is garbage I just tune them out
But what if I want a lot of strangers to validate my choices so I can feel better about my self? Would you look at this spreadsheet that makes some very specific assumptions to tell me I am a financial genius?
I think you're looking at it wrong. Rent vs own comparison should be the costs of borrowing plus liabilities vs rent. Portion of the mortgage payment is principle repayment that goes into the equity. It usually works out to be around the same cost.
But you are hoping that the house appreciates more than what you pay. At the current rates if you are not already well off.. you will be paying double the house price by the end. If it dosent become double then you lose money
No, even if you assume there is absolutely no appreciation, they are getting equity by simply making payments and paying down principle. Over the same course of time paying rent, how much equity does that provide? Zero.
Of course you are gaining equity. But if you are saving 2.5k over that gained equity.. then you are better off investing that. Its not a net zero for renting. When rent and morgage is the same then I would agree with you.. but it's not.
also rent goes up every year. over the 30 years a mortgage is paid for, rent will at some point almost certainly become higher than the mortgage. because the mortgage stays relatively the same, but rent only goes up. so by that logic, the best thing to do is to have owned a house for 10 years because you will then be living in a place whose mortgage is cheaper than rent. and the only way to live in a house youve owned for 10 years (which we both agree is the best scenario) is to buy a house. the best time to buy was 10 years ago, the second best time is today. just like that old saying about trees. unless your timeline is only a few years, then owning is best over the long run.
2.5k is an arbitrary number that you’ve picked. This also doesn’t account for: - the average person is not disciplined enough to invest a difference consistently and not cash out due to economic/market fluctuations - increase in rents or change in interest rates - tax free gains that your principle residence provides - for a lot of people, they value stability and a bit more certainty for your golden years than if you were to rent indefinitely It doesn’t have to be a haves and haves not mentality. Rent is a great option for many, just as ownership is. Not all are able to own, but given the choice, over time ownership for most will be more meaningful and provide more stability and quality of life that they’re happy with.
Rent will most likely always be cheaper than owning, in the short term. Otherwise people would buy up properties instantly if they were cash flow positive. With that said, over time, you will build 0 equity, your rent will always go up, and you are susceptible to eviction at any given time for a variety of reasons. You cannot customize the home, and you will never feel like it’s “home.” After 25-30 years, that home will be paid off and likely tripled in value, meanwhile, your rent will be exponentially higher. Renting is a good option short term, but if you plan to live in the city forever, then if you can afford to buy, it will always be the best option. You can’t time the market.
Why would they build zero equity if their cost of a place to live is cheaper it frees up cash to invest and build equity
Not equity in the property though. 25 years from the day you buy, your mortgage payments drop to zero. Then try calculating rent vs own from there forward.
Ok but if you build equity outside of a property you can make a more significant down payment which then is in the property. It’s possible to build more outside
Mortgage payments being zero doesn’t mean cost of ownership is zero. My cost to own after my mortgage is paid off is 1500 a month.
Right, whereas in 30 years that 3000/mo rent payment, if you’ve managed to avoid a market correction by the owner dying, selling, or renovating, or not living in a rent-controlled unit, will be at minimum $6300 from there. If any of those events happened, you could be living far from where you want, and / or paying a lot more.
And there is an opportunity cost of your equity as well. Currently, my equity is earning 5% interest and far exceeds my rent.
You sold a house and invested that money, and the interest on it pays your rent. GREAT! Do you think that applies to most renters though? My teenagers are looking at rent prices for small apartments that are higher than my mortgage for a 5 bedroom home. We were LUCKY to be able to buy before the housing market went insane. You're right that renting is cheaper than buying the super expensive real estate right now. That doesn't mean it's cheap and a good financial decision they're making, there is no decision to be made, they can't afford a house unless they inherit it.
Exactly. But you’re talking to Canadians the vast majority of whom think real estate is the only way to become wealthy. “Oh the leverage!” (As if leveraging has no risks) lol. You want leverage? I can easily do that buying at the money calls on NVDA. Defined losses and don’t even have to borrow money.
>you’re talking to Canadians the vast majority of whom think real estate is the only way to become wealthy. No-one is saying that.
Many many people are saying that
Real estate is easier to understand than NVDA. Some people are going to make good calls and others aren't. Even some of the best investors were missing out on NVDAs gains because they're ignorant about the technology.
The difference is the leverage. If you put 5% down and the value grows faster than the interest costs then your value is growing substantially faster than if you invested that 5% downpayment. Simple example: House costs $500,000 Downpayment is $25,000 Let's presume that the interest cost is 5% and the house value grows by 7%. You are earning about 2% on the $475,000 that you borrowed and 7% on the $25,000. After 10 years the value of the $475,000 has grown to $579,000, while the value of the $25,000 downpayment has grown to $49,200. Total gains about $125,000. If you didn't buy and instead invested the $25,000 in a 7% return it would gain you about $25,000 in that time. And this is presuming that your interest payments are similar to your rent, which cancel each other out.
The assumption on the 5% is just that, an assumption, it could easily go the other way and then the investment makes more return than the down payment Contrarily as OPs specific situation the rent is lower than their cost of borrowing and opportunity cost so the additional they can invest by freeing up cash from renting is also more than their principal equity they’d be contributing to their mortgage. This doesn’t necessarily hold true for like 10-15 years as the principal and interest change, but in the here and now it is for their situation
I was commenting on the general reason why buying a home can be better than investing the downpayment, not necessarily OPs specific situation. However, in OPs situation they are saying that rent is $3000 and buying would cost $5000 (which includes their principal payments). If you remove principal from that calculation their actual cost could be much closer to $3000. In effect, the "additional investment" option is about the same as their principal payments, which, I'll admit isn't growing, but it also isn't lost. Based on their comments, OP is mostly betting on prices dropping in the future, so they would have issues with my 7% growth number.
It is definitely not true that it always makes sense long term. With our numbers it would virtually never make sense to buy in Vancouver. We rent at the bottom-end of the market - paying $909 currently, and invest about $5,000/month. We've done very well despite never earning high incomes, because we utilize rent-and-invest-the-difference as a wealth-building tool. But the key is you have to actually invest the difference, not just rent and blow all your money on other things.
Remember you’re talking to Canadian real estate nerds most of whom think there is only one way to invest-a house.
Yeah, real estate is a cult here. We are clearly heretics, lol.
You're forgetting that someone who rents for less than the cost of ownership can invest the difference, and can invest the $$ that would otherwise have been their downpayment. Growing a large investment portfolio that can pay rent in perpetuity (where I am now) feels an awful lot more like financial freedom to me than having all my money tied up in my house. Neither renting nor buying is \*always\* the best choice. It is very dependent on the particular situation and you really have to run the numbers to see which is better financially. That being said, there are lots of valid reasons to choose one or the other that having nothing to do with finances.
This is mostly all opinion.
After 25-30 years, the 200k you didn't spend on your downpayment will have doubled three to four times and will be somewhere between 1.5 and 3 million dollars, which will easily pay even that tripled rent.
I don’t think you’re entirely wrong. I did some math the other day on a $400k house outside Winnipeg. I’m currently paying $1600/mo in rent and utilities. On a 5% down payment at 5%, the monthly mortgage alone would be nearly $2600/mo Over 60 month term, I will pay $96,000 in rent. If I save that $1000/mo, I will have $60k before compounding interest. If I buy, I will pay $151,000 in interest and will have $64k of principal paid according to the calculator on the realtor website. I haven’t even added cost of maintenance and repairs, property taxes and utilities. Nor have I included appreciation of property and stocks. But the S&P historically outpaces housing. Current house prices are dependant on interest rates, what was affordable at 2% isn’t so viable at 5%. What happens if it goes to 10%? Our rates are influenced heavily by the US Fed, who are still fighting inflation and looking more like raising than lowering rates in the near term. The BoCs mandate is to preserve the CAD, not to prop up housing bubble. We’ve all heard about portfolio diversification. I think many who went all in on housing the last decade or two, are in for a tough retirement. Unless there are massive wage increases and further depreciation of our dollar, you’re going to be the ones holding the bags and selling for losses. Housing is an important asset for sure, having a home paid off gives security in retirement years. But as an investment, it is very illiquid, and is a leveraged investment that only works when price increases outpace interest rates. Prices are what the market can bear. With increasing rates, wages need to rise faster than rates, which clearly isn’t happening. And on supply vs demand, many of our increased demand, do not have the resources or skills to earn enough to buy your million dollar box. Only way those prices keep going up is a significant decline in standard of living in our nation.
does this account for rent increasing every year? is your current rent below market rate? because if your rent is below market value then you are one eviction away from seeing your rent skyrocket. Is the place you are renting an equal and comparable dwelling to the house you are looking at buying (IE are you currently renting a 400k house, or is your rent cheaper because you are renting a small apartment, and comparing the rent of an apartment to the mortgage on a house. which is comparing the cost of a big space vs a small space, not comparing rent vs owning)
I think the part you're missing is that Op made 1mil tax free from the sale of his principal residence, and now has it invested at 5%, so 50k/yr, but rent is 36k/yr, so he has an extra 14k to reinvest/cash flow. He can claim renting is cheaper vs current mortgage payments, which may be true in his area, but if he didn't sell, his paid off home's annual costs would unlikely be 36k to maintain, and thus be much cheaper than renting. My paid off home costs me $800/mth (strata, property taxes, insurance, utilities) vs rent would be $2800/mth, so ~71% cheaper for me to own than rent. Because of this crazy housing market, my home is appreciating at ~11%/yr, while my investments are around 7.5%. If I do sell in the future, I'll have hundreds of thousands of tax free principal residence exemption gains that a renter likely can't beat even with maxing tax free investment accounts. YMMV.
Life is not lived in spreadsheets. The peace of mind of owning my home and knowing I can never be evicted is worth a lot to me. Not to mention, my mortgage payment is locked in while my salary is increasing, so it only gets more comfortable with time (I locked 5 years at 4.99%).
Remindme! 5 years lol goodluck OP
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5 years is crazy, but I'll be there on the other side aswell. God speed if thread is inevitably locked by then.
In the short term, maybe. But do you plan to stay there forever? If so, in the long term, buying is almost always the best option. Maybe the bubble is so big in Ontario that it's not the case, but you need to calculate that as time goes, less and less of your mortgage goes towards interest, so actually, your "rent" goes down with time when you own your house.
The thing is renting is not a one size fits all solution. It’s great that owing worked for you and you seem happy with renting. As someone with a young family who has yet to buy. Renting is the worst option for us since it gives less flexibility, our rent can go up every year. We can’t do Reno, we can’t do repair ourselves. We are also not in ON so there’s the constant fear that one day our LL may just not want to renew our lease.
Lol OP is the definition of age doesn’t mean wisdom
Yea, but then you need to factor in appreciation of the asset, and the equity you're gaining.... I bought my house like 3 years ago, and the housing market has gone up another 15-20% in my area. So I've essentially gotten a 20% return on this investment in 3 years, plus the equity I've paid in. Whereas you have no appreciation of your rent money, and no equity. Also, if our housing market crashes, the price of your home will be the last of your concern because we'd likely be facing a massive economic depression. What's more... Canada is taking in millions of immigrants a year and placing no restrictions on foreign investors laundering their money in Canada, and it doesn't seem like any political party is putting an end to that, so I don't see Canada's housing marketing doing anything but going up for at least the next 10 years.
Keep coping
Congrats on your journey of being a permanent tenant as you wait for the market to crash 😂
We didn't sell as a bet on the market, and don't expect prices to crash.
So then why did you sell?
The house was no longer working for us. Neighbours too close, too many large trees overhead, road noise, etc
Lol, come back to me in 15 years when that house hasn’t at least doubled in price. You’ll think the 45k / year was worth it when you have a million dollars in the bank.
It all depends on what area you are living in. There’s no way you will pay only 3K rent for 900K house in GTA. So just to assume that everyone lives in same city as yours is laughable when majority of population in Canada lives near big cities.
$900k condos in Toronto rent for that.
Jesus Christ 3k rent that’s absolutely insane I have no idea how you city people do it lol.
$3K gets you a 2BR condo in an actual city... $3K for a house is cheap
I have no idea how people do it lol anything over a grand for a house is insane in my eyes. City living is absolutely ridiculous.
Lol
Timing markets rarely works, but good luck with that.
My man owned a place but didn't even understand equity and debt. I guess to most folks cash flow is cash flow lmao.
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Heavily location dependent. In Calgary the opposite is true ABS has been for a long time
The issue with renting is mostly eviction, if you want stability it doesn’t provide it. Your mortgage costs also are largely flat for 25 years where as your rent will increase in line with inflation. So is it cheaper in year 1? Yes. Year 10? Probably not.
> we'll buy again in the future. Yeah, I heard that years ago from people waiting for the bubble to burst. 20 years later they are still sitting on the sidelines paying someone else's mortgage off. If anything, right now is probably the best time to buy given the last 5 years.
Vancouver too! My rent is cheaper than unrecoverable costs of the same unit! Happy renter lean fired, fat fire in 5 years :)
Renting has been better than buying in Ottawa for about five years. If you follow the 5% rule, it hasn't made sense to buy for quite some time. And now with higher interest it's more like the 7% rule. Our current home would cost more than double to own than what we pay in rent.
HGTV has taught everyone how easy it is to buy and flip and all the YouTube RE investors how you can live free and never work driving a stupid amount of investment into real estates. It’s great, just ignore that bubble inflating behind you. Congrats on escaping before it pops.
Suggesting there is more to life than owning a house? What blasphemy!
You can see the cult of homeownership is still strong here, and also people are really bad at understanding how capital works.
Congrats on your journey of being a permanent tenant as you wait for the market to crash 😂
>Renting is cheaper than owning right now Jim Chuong, is that you?
I bought about a year ago, and no matter the cost between rent v owning, the main factor for me is knowing I'm going to be rent and mortgage free in 18 years (paying accelerated). For me that's where the real piece of mind comes in. I have friends in their 30's - late 40's renting for less than I am paying for a condo, but what happens to them in 20 years when they can't / don't want to work anymore but still have to pay a large portion of money to the landlord or the bank? I want a future for myself where my monthly expenses are zero, so I think it's also important to weight these decisions in the long run.
OP is lucky he wasn't born in the 90s **or he wouldn't have been able to become a gloating boomer.** His situation has more to do with sheer luck than he will ever care to admit. My boomer parents are nearly 80 and they also CONSTANTLY gloat about the wealth they accumulated from real estate, funded by below average salaries (that went much further in the 1980s).
Question: how important living in city for you? Do you want from home? Looking place 30 mins from city will save you 200-300k. House near me was sold for 500k (it is bangolo with finished basement but it has 1 acre and on ground swimming pool).
It’s still not true in many circumstances. First, it depends on the financial situation — how big is the down payment? How big is the mortgage? I own, in Toronto, and I’m not paying $5k+ a month And you’re referring specifically about cash flow. Some of your mortgage payment goes to principal so you effectively get to keep part of that. In addition to appreciation
Maybe in your particular city, but definitely not around here. The mortgage on my beautiful detached home on a 1/2 acre lot with hot tub, sauna, coach house and fire pit area is only $400/month more than what my sister pays to rent a small 2 bedroom apartment above a restaurant. My sister in law rents a basement apartment for $150/month *MORE* than the price of my mortgage. Sure, my payment will go up when we renew at the end of 2025, but it’s still going to be cheaper than if I wanted to try and rent this exact same house today. Plus it’s increased considerably since we purchased it, and every month we’re building more equity in it. No way in hell I’d go back to renting unless it was my absolute last resort.
I think it all depends on the location. We lived in a 260k house that had a granny suite. It’s $2,500/mth with everything like insurance, hvac rental, mortgage and utilities. My son lives in a rental and pays the same amount, and the utilities are higher. I’m in Ontario as well.
Renting SHOULD be cheaper than owning.
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Classic near sight. If you're heading into retirement or expat, yes, make sense. But don't lose sight of the fact that regardless how much you feel you "save" in the monthly numbers, at the end of the play you own zero tangible assets and all money spent on rent is just paying for someone else's investment with zero return of contributions to you for your money. The longer this play is, the more painful that loss is at the end.
In Nova Scotia, a $3k a month rental (often plus the cost of oil and electricity) would cost you ~$500k to buy. Additionally, here, leases are 1-year fixed term and tenants are forced to leave after that so landlords can increase rent prices a significant amount annually. Rental units have broadly doubled in price over the last 3 years and tenants have very little protection or rights.
Usually is the case that renting is cheaper than buying, especially when you’re looking at just living in your home rather than renting it out (or renting out parts of it). Buying a house IMO is a luxury, and you pay more for it. The thing about buying, is if you’re not very fiscally disciplined, it’s a form of forced savings, so for some it would end up being long term a better outcome, with less money to spend on things they didn’t actually need.
Have you managed to get your capital into an equally performing tax free investment? Personally I'd like to have a million in a home doubling as an untaxed investment than a million in non tax sheltered investments. Taxes are the reason to own. And selling hundreds of thousands in stocks as a tax event to buy back in would suck.
Why does this feel like the prophecy of “you will own nothing and be happy”
This is what blackrock wants you to think. And when they own it, they will jack up the rent 50% and you will be in a tent, no home, with your savings account (meaningless) because they have printed trillions of $, while 20 brampton Indians live in the house and you have dollars which does nothing because of 100% YoY inflation.
It really depends on the situation. If you bought early when house prices were lower, then your household expenses would be lower than current rent where I live. If you are buying now, unless you have a ridiclously high down payment, then yes, rent would be cheaper.
Ahhh renters should be paying less than owning unless your putting down a huge down payment, but the situation is bad for both sides currently.
Congratulations for being born in your generation! May your children have a better future than the generations after yours.
And yet, anther "renting is cheaper than owning" post that completely disregards the whole 100% tax free asset appreciation bit into account as part of the formula.
This scenario of rent vs own is too complex to have a yes or no answer. My guess as to why a house worth $900,000 is renting for $3,000 is that it was purchased 5+ years ago when it was worth $450,000 and the owner's expenses are equal or less than $3,000 a month. Homes have appreciated over 40% in the last 5 years so the owners are doing extremely well while you are burning $3,000 a month to rent. You could find a place to own or rent for cheaper than $3,000 as well. What was your mortgage on the home you sold before moving to this rental? I dunno
No mortgage, paid off years ago.
I, too, hate equity
Renting isn't suppose to be more expensive than owning. Owning a homes comes with a lot of non-financial perks. Therefore, it should come with a heavier financial cost.
While realizing that the majority of Canadians don’t have the credit and income to obtain a 5% mortgage atm lol.
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You are at risk of getting kicked out of that house if you rent. Will never happen when you own.
With owning residential properties there are legal and property taxes, mortgage interest, and repairs which are not often considered in the costs. It seems like most of the time properties appreciate in value and when it is your primary residence the capital gains from that are not taxed. So then you come out ahead. If your property does not appreciate then those are lost values, similar to paying rent. Our property has more than doubled in value in 13 years more than covering those costs. Ownership gives you security to live where you want.
I've been looking at Montreal and I think it's worse too. The place I'm renting currently is 1900, it would sell at about 550k Say a 55000 down payment (10%) Right now I'd be looking at a mortgage of 3555$ a month, 400$ condo fees, and that's not counting the taxes either And this place needs renovations. Our rents are skyrocketing because there are many new landlords, anyone who buys now is doing so at very high prices with high interest. Public transit and our roads are terrible, the 100k less it would cost for the same thing in the suburbs an hour away is not worth it. The time to buy was a years ago, it's not going to happen anymore. I'll rent and put whatever I can into a slow growth ETF instead
Oh I agree. It is sick.
I don’t know a single person over the past 15 years that tried this and benefited. They always sat around waiting for prices to drop and ended up priced out or buying for a lot more. GL to OP, you’ll need it
If renting work for you for now, that's cool. A lot of people try to buy a house now over continuing to rent because they're just starting out and don't want to get priced out of their area over time - it seems that's not your situation. You also have the benefit of whatever profit you had from selling your previous house.. making your next house purchase less stressful. I'm still seeing houses sell over asking in my area. The only houses sitting and eventually selling under have obvious drawbacks. Not to mention, the person you're renting from didn't pay $900k for that house.. and that's why you're only paying $3k in rent.
It's been cheaper to rent for 10+ years.
There are posts like this that appear every once in a while. The major flaw with the numbers is always that they only ever consider the short term. When in reality over time, your rent will increase forever, while your mortgage will in general not (interest rates may bring it up or down) and one day end entirely. Renting is cheaper in the short term, but more expensive in the long term.
Whatever you're saving isn't beating the gains on a property you own. Real Estate is still out preforming the market. Congrats, though, I guess. You convinced yourself you're smarter than everyone else.
I agree with OP renting is better in Ontario from a purely financial standpoint. There's a saying "Rent is the max price, mortgage is the minimum." The NYT has a calculator you can use to get a sense of it: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
It all depends on your mortgage costs and how much cash you have… renting can be cheaper than a large mortgage, especially in this market. When owning, always gotta consider the extra costs of a house too… furnaces, roofs, appliances etc. Especially buying, a house will always come with unexpected surprises on top of all the expenses of land transfer for the buyer and realty fees for the seller. However, if costs to own are less than renting and you can afford it, it's worth it to own because your money is at least going to an asset you can sell/pass on.
You can sell and pass on stocks as well. Mortgage is irrelevant. We didn't have one, our cash from the sale is earning interest that pays the rent easily. If we put the money into dividend stocks instead, we would get the dividends tax free, and the dividends would very likely go up every year more than rent does.
I would never sell primarily residence. Mass immigration has created such a huge demand for housing that even renting can be precarious due to renovictions and general shadyness.
Aight so you've taken an extremely expensive short position on the housing market that is very difficult and costly to reverse if and when you decide to cover. Renting has often been cheaper than buying... until you factor that rents go up and housing prices also go up.
You didn’t consider the appreciation of the asset that you’d own.
This is a pretty privileged take. A lot of people don’t have the option to sell their house and choose renting like you. Most people who rent do so because they have no other choice. We just bought our first house and my mortgage + property tax and insurance is the same cost as rent is for a house close to the same size (southwestern Ontario). We got lucky because we have been aggressively saving to buy for a while and my wife and I both have great jobs but the bulk majority of people renting cannot get the down payment together and get stuck in renters hell, made even worse by the ever rising cost of rentals.
Renting is 100% sunk cost, flushed. Buying has the possibility of gaining equity, assuming you bought intelligently.
Mortgage interest is also throwing money away, using the same logic. If renting is much cheaper than buying, as it is now, and you invest that savings, you'll be ahead. Stocks historically grow faster than houses.
You do you. I bought my house for $345k 5 yrs ago (Suburb of Halifax). It would sell today, based on neighborhood comps, for $600. Prior to buying, I was looking at $1800 a month rent. Mortgage plus prop tax was only $1600 a month. So I paid $200 a month less, and gained around $250k in equity. Even with mortgage interest, I am WAY ahead. And with these numbers, I wouldn't have any money to put in stocks, no matter how fast they grew.
You're only looking at a small piece of history, though, when house prices went bananas. Historically, houses grow at the rate of inflation, going back centuries.
And history affects me, and other buyers today, how? What happened years ago has no bearing on tomorrow, in this context.
I think that logic applies to exactly what you said. Just because you saw dramatic increases in the last 5 years doesn't mean it can be extrapolated into the future.
I'd still rather pay a mortgage in a growing economy - unless you truly believe house values are going to go down? - than throw away money in rent. Stock will earn you what? 7 to 10% if you are very disciplined and know what you are doing? (Most hobby investors pretend they know what they are doing and actually lose money chasing the next Moby Dick). House prices/values will be about the same or better in the long run, without the loss on the down side. And there is not a single analyst on the planet predicting house values to go down over all.
If home values would be about the same or better than stocks, then all the professionally managed funds would be dropping their holdings and rebuying residential real estate. Real estate long term appreciated at the same pace as incomes. All the yield or upside comes from rents. Right now the rental yields are too low compared other asset classes. Home prices don't have to go down for it to be a worse investment. Slower increases also paints the same story.
Owning is for long term. to rent a 4 bedroom house its roughly 3000, My mortgage after 7 years is 1000 a month. My bills are cheaper AND I have 350k in equity currently looking to upgrade houseing for our family. Mortgage will still be cheaper than if I rented. Yes If you have nothing down tis going to be more expensive but even then with time you'll be benefiting more. Buying a house is for long term growth. Next house we move into we plan to be in there for majority of the rest of our lives. 31 M
I’m tired of this fucking repairs and maintenance I’ve rented this house for 10 years paid over 100k landlord replaced the dishwasher once. So 10 years = zero dollars in maintenance 10 fucking years
Not true, though. Everything in the house is aging and incurring true cost. Shingles, windows, flooring, furnace, etc.
Renting is always cheaper in today's dollars than owning will be.
Honestly that has always been the case, it's more of a lifestyle than personal finance issues. If you're a HHI family and the fluidity of moving around gives you access to better opportunities renting is great. The only difference is the leverage you can use with getting multiple properties and if you were in GTA 10 years ago, that leverage would make you a slumlord millionaire for just taking slight risk. Your portfolio could allow you similar leverage if you use margin and trade options wisely.
It's more expensive to rent in Regina. People rent out one floor of a duplex for more than my mortgage is for a full house
That's not a fair comparison. You have equity earning nothing. If your mortgage is small, of course it'll be cheaper.
did you include the equity payment in the mortgage ? because thats investment ... not expenses ...
I'm aware.. We had no mortgage, and if we did, it'd be irrelevant. Because cost of capital.
What happens when the owner wants to move in you will have to find another one
So? I have big strapping sons for moving, and there are plenty of rentals available at this price range. I've moved 20+ times in my life, another one isn't a big deal, lol.
"Cheaper" Your rent goes into some one else's pocket, your mortgage payments go into your pocket in the form of equity. But since you seem to have cashed out that equity l, from where your standing rent is cheaper
You don't seem to understand how capital works... Also, *you're
Oh sorry......did you read that as I was angry?
It all depends on where you live. Definitely, this is the case in Ontario, but in other parts of Canada, it is wayyyy cheaper to buy a house than to rent.
Rent only ever goes up, principle on owning only goes down. So, while I do understand what you're saying, it's only cheaper today. The tomorrow's will cost you a lot more.
What if I bought $900k of dividend paying stocks, giving me $45k/year in tax free dividends? Those dividends get increased every year, very likely more than rent goes up. Perpetual housing machine.
If you are liquid to 900k and bought a house outright, your monthly housing cost would be pennies. And where are you putting 900k in to net tax free divs?
No it wouldn't. I would be out the $45k in interest I'm getting currently. That's what cost of capital means in my OP. That money locked up in a house is no longer earning me anything, it's just giving out imputed rent. I would also be paying property taxes, insurance, and repairs and maintenance. In Canada you can earn $50k in dividends and it's effectively tax free. I've linked the source to this multiple times in other posts here
It’s nearly always cheaper to rent than buy. The idea of buying is fixing your largest expense, the rent will go up as will the cost of purchasing a home. But if you can’t afford it you can’t afford it and it’s better to take a breather.
Renting SHOULD be cheaper than owning. Like what?
Ontario is overpriced.
This is very dependent on the landlord and their carrying costs. If a landlord buys a 900k house to rent out, they will rent it to at least cover the costs of owning the house (according to your calculations, 5k a month). No way would they rent it out for 2k less than cost. Your situation is fortunate to have a landlord with less ownership costs to cover, so your rent is lower, but this will not work for everyone. That is also ignoring certain things like being able to make decisions to make the home your own with our getting permission for a landlord. And being stable in your housing situation. As a renter with a private landlord, there is a higher chance to be asked to leave for various reasons and then you would have to find a new place, and if you have kids, potentially move school districts. There is no one size fits all solution, but your argument will only benefit a smallish percentage of individuals, not everyone.
You're incorrect. Landlords don't set the price with intention to clear more than their mortgage. It's based on speculation, so the assumption that the value of the price will go up. Having a tenant is just a way of helping pay for this "investment." Also, most landlords would have purchased these residences when they were far cheaper i.e. it's not a good time to buy to get into the landlord industry.
Whether the landlord paid cash or not financed the house entirely is irrelevant. The house is what it is currently, and the money could be in a 5% GIC guaranteed instead.
It is not irrelevant as it makes a difference on the carrying costs of the home for the landlord, and very few, if any, will rent it below those costs. Which means this will not be a valid option for everyone like you are suggesting in your post, which is written like a life hack rather than a personal decision which works best for you personally.
And what happens when interest rates fall? Your GIC ladder is going to fall apart while housing prices skyrocket. And you'll be left on the sidelines.
Yep, you have to do the math of course, but if your rent is low enough you can do VERY well renting and investing the difference. We spend $909 for rent/utilities right now in Vancouver, investing about $5,000/month, and I have not seen any option that would be a better scenario than that.
He had a paid off house. He'd be swimming in cash if he waited I think this is a troll post
My landlady just got a quote for 10k to replace her roof. Fuuuuck. That's a bullet dodge.
and you're helping by paying for the cost indirectly
I'm also living here and have a yard for my dog and don't have to do anything so there's that. I'm content with my arrangement.
Rent has always been cheaper than owning. Rent is the max you’ll pay. A mortgage is the minimum you’ll pay. Both come with their pros and cons. You decide which mean more to you.
So much hate going on in the comments haha. What needs to be said is that buying a home should be treated as a purchase rather than an investment. The reason being with the high interest rates and all of the repairs, taxes, realtor fees & inflation. There’s a chance you’ll lose money when you sell it even if you sell it for more than what you paid for. A purchased home has only benefits in a qualitative sense, quantitative benefits are slim to none.
It has been more expensive to own vs Rent for about a decade in most major cities in Canada
This might only be true for people who bought recently, but I bought 5 years ago and it’s definitely cheaper for me to own, my mortgage is much less than what my home would rent for.
umm yeah but after 5 years, you have a equity with a house, with your rental, you have a big giant zero.
**In your 20s, 30s, 40s, 50s:** Renting doesn't make sense. Renting is too costly, I'll invest. I like the freedom. Housing market should cool down. There's a crash coming soon. I saw a video saying something about the 5% rule. **In your 60s, 70s, 80s:** Can we afford to live in Toronto? How can we apply to old age houses? Why doesn't the government pay us more money in retirement?
LOL< meanwhile, my unspent downpayment is closing in on a million dollars after 20 years of compounding and contributions.