# Buy or rent



## MrBlackhill (Jun 10, 2020)

Hi all,

Typical question.

Well, I did my own calculations, but I'm not a financial adviser, so I definitely have missed a few things. Please teach me. Never too old to learn.

Buying

Expenses = Mortgage payment, taxes payments, maintenance & renovation expenses
Investing = None (assuming any investments here would be extra money which would also be invested in the renting scenario anyways)
Profit = On sale, based on a value increase of 4% per year, minus all expenses due to selling and paying the remaining mortgage, if ever
Tax = No tax for the profit of the part of the property in which you live in, but will be taxed for the profit of the rented part of your property
Renting

Expenses = Monthly rent
Investing = Investing the difference between buying scenario's expenses and renting scenario's expenses (monthly rent)
Profit = From investments, based on a 9% per year over the long term
Tax = Will be taxed since you'll end up filling pretty quickly your TFSA and RRSP since the money you would have used for a down payment would instead be invested in this scenario
(Please take my numbers of 4% and 9% as if they represented the reality)

So, I get that when buying a property, you are leveraging your buying power and even though 4% may seem low compared to 9%, that's 4% on a big amount of money that you don't have (the value of the property).

I get that when buying, you should not plan on selling within the next 5 years because you'll mostly end up losing money from all the expenses due to buying and paying the mortgage (I'm not in the situation to do flips).

But then, from my calculations, after about 15-20 years, you start having a nice potential profit on that property and since the value increase is only 4% compared to 9% when investing, it starts being more interesting to sell that property and invest that money instead of keeping the property.

In fact, it will always be the case at some point in time as long as the CAGR on investments (minus taxes) is higher than the CAGR of the value increase for the property. So why don't we all end up selling our property and rent? (Or if your work income has increased a lot, you can leverage your money again by buying something bigger, or maybe the key is to use the huge advantage of a line of credit on the home equity at low interest rate and use that as leverage for growth investments?)

Well, that's what I plan to do : sell in 15-20 years and not buying back anything else. But I would not sell in order to invest the profit in 9% growth because at that time I'll simply retire and invest in fixed income like dividends. Or maybe I would not sell and instead I would rent both units (I bought a duplex). I'll figure out which option brings more fixed income at that point, but I still feel like I'll sell and buy dividend stocks, it's less management than having an income property.

What's wrong with my calculations? There's definitely knowledge that I'm missing about strategies, so please explain me what I'm doing wrong.


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## Just a Guy (Mar 27, 2012)

Most Canadians move every 7 years. Cost to sell a house (layers, realtors, bank fees, etc.) break even is 7 years. Market is correcting across canada. There is a lot of talk about capital gains exemption being revoked to pay for covid.

movement is easier if you rent. Most houses, historically only maintain inflation value. Don’t forget the Interest on the mortgag, paid with after tax dollars. 

propaganda says we all need to own houses, for most people it’s their only savings plan.


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## doctrine (Sep 30, 2011)

15-20 years is a long time to wait for profit. It's also a long time for a property to depreciate. If you are staying in the same city, you won't be any further ahead, net profit or not. I know people who have owned homes in Vancouver and Toronto for decades. They will only be ahead if they leave those cities, otherwise they can't even afford to sell and move to a better house down the street, because the price difference between a new home and a 30 year old home is huge - up to 100% more, reflecting in part those 30 years of depreciation. But they don't want to move. Because they have lived there for so long and that is where family and friends are. 

Not owning a home means less work and more freedom to do what you want. I haven't owned a home in over a decade and I don't mind not spending my weekends and summer vacations renovating. I also have more time to make professional/career gains. For some people, owning a home definitely a good choice, maybe most people. At least it is something tangible. But it definitely ties you down. And your cash flow. But you don't have to live through months like March either. Investing in the stock market is less work and in many cases more profitable, but can definitely be more stress.


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## Topo (Aug 31, 2019)

Ben Felix has done a video about rent vs buy. He suggests if one could rent annually for less than 5% of the value of the house, then it is better to rent than buy. 






I think it is more of a lifestyle decision. Most people want to live in their own house, particularly if they have small children. A stock portfolio is more diversified and is likely to provide greater returns, but (unfortunately) we cannot live in it.


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## Longtimeago (Aug 8, 2018)

The debate of rent vs. buy has been around as long as the choice has existed. The problem with trying to 'do the math' is that the math is always based on assumptions and you may be familiar with what 'assumptions do'. Make an *** out of U and ME.

No one who does not own a crystal ball can tell you whether doing one or the other today will turn out to have been a good decision 15-20 years from now. 

Personally, I believe in buying but NOT buying something I could not afford if things went to hell in a handbasket as they say. The biggest mistake I see homebuyers making today is buying more house than they need and having a huge mortgage they could not afford to service if one or the other partner lost their job. A couple in their 30s, both earning good money, do not NEED a McMansion to live in and yet that is what most seem to want to buy.

So my point is, if buying, buy SMART. Buy only what you can afford without being 'house poor'. As an example, there is a young couple near me who sold their condo in Toronto and moved to a small town. They work primarily from home with one of them needing (pre-Covid) to go to the office an average of 1 day per week. They bought their 3 bedroom house here for $100k CASH. No mortgage to worry about.

Now tell me if they made a wise choice if say one of them was currently out of work due to Covid?


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## MrBlackhill (Jun 10, 2020)

Good, so both of you guys also think that it's better to invest instead of buying, so I'm not wrong thinking that owning a home is not that big of a deal, even if it's leveraging money. Yes, I've also heard about that break even point after 7 years.



Topo said:


> Ben Felix has done a video about rent vs buy. He suggests if one could rent annually for less than 5% of the value of the house, then it is better to rent than buy.
> 
> I think it is more of a lifestyle decision. Most people want to live in their own house, particularly if they have small children. A stock portfolio is more diversified and is likely to provide greater returns, but (unfortunately) we cannot live in it.


Thanks, that's interesting, lots of good information. It confirm many of my assumptions. Still, that 5% rule is an average rule through all Canadian properties. I'm trying to figure out my own situation. For example, how do I use that 5% since I've bought a duplex? I use the 5% rule on the price of my property, then I subtract the net profit from renting a unit? If I do that, I end up about exactly on the frontier of the buy-rent decision.

If I do a full list of all the parameters I'm taking into account in my Excel for the calculation of the cash flows and net profits :

Buying

Value increase of the property
Current income of the rented unit and expected increase over the years
Mortgage rate (assumed fixed through all the years as I cannot predict what will happen in 5 years)
Initial down payment (which is used as an investment of the renting scenario)
Mortgage value (the exact value which includes CMHC since I had less than 20% down payment)
Annual taxes
Maintenance and renovations
Initial renovations (since I have a lot of renovations to do in the 1-3 first years and in the renting scenario that will be invested)
Expected profit on the initial renovations (as if I wanted to flip the property)
Buying general costs (notary and all that stuff)
Selling commission cost
Selling general costs (notary, inspection and all that stuff)
Taxes on the profits from selling (for the rented unit)

Renting

Renting cost and excepted increase over the years
Initial investment (all the money I can invest since I don't have to do a down payment nor renovations nor notary expenses, etc.)
Investment of the difference between all the recurring costs of buying and the costs of renting
Taxes on the profits from investments

Then, I looked at the archives for my specific property type (plex) in my specific sector in order to have an idea of the expected value increase of my property over the years. I used the median value since I think it's a better metric than mean value. The archives only goes for the past 11 years, so I guess I'm missing the worst years. Over the past 11 years, the median value increased by 92%, which is about 6% CAGR. That feels pretty high so I looked at the worst 5-year return and it was 18%, which is about 3.3% CAGR. In the scenario of my initial post, I went for 4%.

For the investments, it's also pretty hard to estimate the CAGR, but I had more data on my hands than what I had for the property value increase. I used SP500 index even though I'm currently outperforming even NASDAQ index. That's because if I use the returns of NASDAQ of the last 10 years, there's no question that renting & investing was better than buying. Since I don't know what will happen in the next 15 years, I prefer being more conservative on my expectations.

Based on this : S&P 500 Historical Return Calculator the SP500 has returned a median CAGR of about 6.5% for its 10-,20-,30-,40-years rolling returns. In the scenario of my initial post, I went for 9%.

With that 4% & 9% scenario, my conclusions are that I should have never bought the property.
If I use 3% & 6.5%, then buying was a good decision only if I hold that property for at least 26 years and the best sell point is after 32 years
If I use 5% & 6.5%, then buying was a good decision only if I hold that property for at least 11 years and keeping the property is always more profitable as long as that 5% value increase is sustainable
If I use 5% & 9%, then buying was a good decision only if I hold that property for at least 15 years and the best sell point is after 26 years

If I plan to retire in 15 years and travel around the world, then there are no many cases where buying was truly a good choice. I still have to figure the scenario of renting the unit I currently live in.

Yet, after all that analysis, yes, renting is less job and in many cases it is more profitable, but in my sector people in the kind of unit that I have are all owners, they don't rent it. Even if I would've been able to find one for rent, I would never know if at some point the owner would decide to stop renting it and I would have to move out. I would also have to follow their rules (example : no pets) and I would have to be happy with what I'm getting instead of making projects for renovations to my own taste. I would have to make sure that I can deal properly with the owner about the yearly rent increase.


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## MrBlackhill (Jun 10, 2020)

Longtimeago said:


> The debate of rent vs. buy has been around as long as the choice has existed. The problem with trying to 'do the math' is that the math is always based on assumptions and you may be familiar with what 'assumptions do'. Make an *** out of U and ME.
> 
> No one who does not own a crystal ball can tell you whether doing one or the other today will turn out to have been a good decision 15-20 years from now.
> 
> ...


I agree with that.

I'm doing the maths simply because it's unfortunately in my engineer's personality and I'm currently working in a company where our job is to build a software which is used for financial projections, so I'm even more biased for the value of calculations and simulations of scenarios. When we do calculations, we input a few parameters that gives us one scenario. Since we don't know the future, the goal is to run a huge amount of scenarios and then do a statistical analysis on the output of all of those scenarios. That's how big companies use that software in order to help them in their financial decisions. Once you have a nice distribution of all the possible future scenarios, the only remaining parameter is your risk tolerance. You decide of your risk tolerance and then you take decisions based on the scenario that statistically fits that risk tolerance.


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## Longtimeago (Aug 8, 2018)

MrBlackhill said:


> I agree with that.
> 
> I'm doing the maths simply because it's unfortunately in my engineer's personality and I'm currently working in a company where our job is to build a software which is used for financial projections, so I'm even more biased for the value of calculations and simulations of scenarios. When we do calculations, we input a few parameters that gives us one scenario. Since we don't know the future, the goal is to run a huge amount of scenarios and then do a statistical analysis on the output of all of those scenarios. That's how big companies use that software in order to help them in their financial decisions. Once you have a nice distribution of all the possible future scenarios, the only remaining parameter is your risk tolerance. You decide of your risk tolerance and then you take decisions based on the scenario that statistically fits that risk tolerance.


LOL, and how many of these scenarios you do have Covid in them? I'm well aware of statistical analysis MrBlackhill AND of its shortcomings. At the end of the day, buy or rent, you place your bet and take your chances.

I retired at 43 and have travelled around the world. I owned (as in no mortgage) a home when I retired and have owned every home I have lived in since with one exception. I have also made profit on each home I owned. I've never had to accept any risk of not having a roof over my head. You only need to decide your risk tolerance when a risk exists.


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## MrBlackhill (Jun 10, 2020)

Longtimeago said:


> LOL, and how many of these scenarios you do have Covid in them? I'm well aware of statistical analysis MrBlackhill AND of its shortcomings. At the end of the day, buy or rent, you place your bet and take your chances.
> 
> I retired at 43 and have travelled around the world. I owned (as in no mortgage) a home when I retired and have owned every home I have lived in since with one exception. I have also made profit on each home I owned. I've never had to accept any risk of not having a roof over my head. You only need to decide your risk tolerance when a risk exists.


All of them. All financial scenarios include a recession probability.

All financial models are to the asset level, millions of assets, and for example electric utilities even include lightning probability, vegetation management, summer fires and recession, just to name a few.

And about retiring at 43 and traveling around the world and having no mortgage, it's not given to everybody, but I'm glad you had that chance.

Risk exists in every single decision you make every single day.


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## Prairie Guy (Oct 30, 2018)

Buying a house is a lifestyle choice that shouldn't be based on the numbers alone. If you don't want to do chores and maintenance then don't buy a house. You can spend a lot of money calling in a contractor every time something needs to be fixed.

If you like puttering around in the garage, mowing the lawn, and fixing things when they break and want a place that you can call your own then you may be more suited to ownership.


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## Just a Guy (Mar 27, 2012)

Homes are not investments, they are places to live. Even rental houses are not really investments in the long term. Out of all the places I own, I buy and own for the cash flow, not the capital gains. I expect the prices to remain close to what I bought them at, but I Buy below market. If they don’t, I don’t really care because they make money each month, if they didn’t they aren’t an investment. If, for some reason, they make capital gains, that a bonus, but can’t be accounted for when I buy them. They could drop in price very easily as well. Then again, I won’t lose money if they do because they are paid off using opm, unlike a home.

ive also rare seen a person who actually made money on a home. Sure, they sell it for more than they paid, but did they factor in all their actual costs over the years they lived there? Did they replace the doors, windows, roof? Did they do major landscaping or something that they forgot about because it was just a normal expense at the time? Many people fudge the numbers to feel good at the time.


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## MrBlackhill (Jun 10, 2020)

Prairie Guy said:


> Buying a house is a lifestyle choice that shouldn't be based on the numbers alone.





Just a Guy said:


> Homes are not investments, they are places to live.


Yes, that's absolutely true and I must never forget that. I totally agree.


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## like_to_retire (Oct 9, 2016)

The math on this question isn't that difficult, but all the math in the world doesn't account for human nature. That's the real difference in the outcome. 

While the owner is forced to make their mortgage payment for 25 years, and always somehow finds a way to pay it, the renter always finds a way to make an excuse to not invest regularly to make that math work. "I can't invest this month because I need a new washing machine", or "There's no way I can invest this month because my son needs tuition", etc, etc, etc. The collection of excuses are greater than anyone can list.

So after 25 years the renter is still paying the rates of the day, while the owner has finished paying off his mortgage and never has to make another payment. They are now blessed with an abundance of cash to start investing. The renter has to continue to pay the full load of rent subject to inflation and it's a wheel they'll never get off.

Only the very, very committed can make renting pay better than owning. It's human nature.

ltr


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## Just a Guy (Mar 27, 2012)

I fail to see how a paid off mortgage would change the list of excuses you attribute to a renter. People usually spend to their income, it’s why they always complain they need a raise...the problem will be there for home as well as renters because they are human being, not because of their households.


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## MrBlackhill (Jun 10, 2020)

like_to_retire said:


> The math on this question isn't that difficult, but all the math in the world doesn't account for human nature. That's the real difference in the outcome.
> 
> While the owner is forced to make their mortgage payment for 25 years, and always somehow finds a way to pay it, the renter always finds a way to make an excuse to not invest regularly to make that math work. "I can't invest this month because I need a new washing machine", or "There's no way I can invest this month because my son needs tuition", etc, etc, etc. The collection of excuses are greater than anyone can list.
> 
> ...


I agree that the "advantage" of a buying a property is that it's a "forced savings" because you have to pay that mortgage, no matter what. Or sell.

On the other hand, I also think that it's pretty easy nowadays to do some "simili-forced savings" with automatic withdrawals going into investments. One can setup that, every month, xxxx$ is withdrawn to be deposited in an investment account. Therefore, that money cannot be spent elsewhere. Though, I agree that if ever you face a situation where you need money, taking that money out of the investment account is much easier than taking it out of a property value. (But you could still always be in debt if you keep using the home equity line of credit)

With investments, I feel a bit safer because if ever something really bad happens, I can use that money, whereas on the other side I would have to sell my whole property in order to have access to extra cash (in a scenario where the required money is much more than the emergency fund). Also, with investments, if ever I decide I want to live a bit more in the present and paying myself a few travel trips, I can and it will only affect my savings for the future and my retiring plan, but with a mortgage, you are stuck with that payment for 25 years so you cannot decide to change your balance between living the present vs saving for the future (not as much as the other scenario).

I mean, that's another subject which needs some thinking : finding the perfect balance between saving for the future and living in the present. I'm personally more about living in the present because I don't know what will happen in the next year (and I like extreme sports & activities like skydiving), but living in the present means less savings for the future (unless all the activities that thrills you are all cheap). On the other side, I'm pretty bored with my career and I'm seeking opportunities to become self-employed in a domain that thrills me (with decent income) instead of being employed which means doing stuff "for the good of the company". Therefore, I also want to retire early to escape that life. But in my current financial situation, I cannot have both. So, like most people who aren't doing 6 figures, I make frustrating and depressing choices so that I can have a balance between a bit of living in the present and a bit of saving for the future. I should not complain though, as I am in a financial situation which is way better than the Canadian median.


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## Topo (Aug 31, 2019)

MrBlackhill said:


> ..... but in my sector people in the kind of unit that I have are all owners, they don't rent it. Even if I would've been able to find one for rent, I would never know if at some point the owner would decide to stop renting it and I would have to move out. I would also have to follow their rules (example : no pets) and I would have to be happy with what I'm getting instead of making projects for renovations to my own taste. I would have to make sure that I can deal properly with the owner about the yearly rent increase.


That is exactly a lifestyle choice, a completely valid approach. I would view any returns on the house as icing on the cake. Let your portfolio do the job of getting you to retirement.


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## doctrine (Sep 30, 2011)

like_to_retire said:


> So after 25 years the renter is still paying the rates of the day, while the owner has finished paying off his mortgage and never has to make another payment. They are now blessed with an abundance of cash to start investing. The renter has to continue to pay the full load of rent subject to inflation and it's a wheel they'll never get off.


This is very true and it is why most people buy homes. However, as I stated above, it is also a bit of an illusion. Decades down the line, your home won't be worth as much as you think because of depreciation and time moving on. There are plenty of people who own their homes for 40+ years and live in them until they die. Those homes are torn down as often or more than they are renovated because they aren't worth anything if you don't invest in them. Maybe that's good enough, but it's hardly a cash rich retirement. Owning your home is good, but if it's all you have, you will probably find yourself slowly selling off your equity or downgrading to afford to continue supporting yourself.

It is possible to work hard, invest in yourself, advance your career, be flexible/mobile, build your capital, and rent, and when you are ready to settle down at mid-life, have a huge chunk of capital to potentially buy your house outright. Although, with mortgages at 2.3-2.5%, if I bought a house today I would almost certainly mortgage, even though I have a lot of capital saved up from a couple decades of investing. You have to be smart and trust in yourself. Some people are smart enough to not trust themselves and take alternate routes.


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## Longtimeago (Aug 8, 2018)

Just a Guy said:


> Homes are not investments, they are places to live. Even rental houses are not really investments in the long term. Out of all the places I own, I buy and own for the cash flow, not the capital gains. I expect the prices to remain close to what I bought them at, but I Buy below market. If they don’t, I don’t really care because they make money each month, if they didn’t they aren’t an investment. If, for some reason, they make capital gains, that a bonus, but can’t be accounted for when I buy them. They could drop in price very easily as well. Then again, I won’t lose money if they do because they are paid off using opm, unlike a home.
> 
> ive also rare seen a person who actually made money on a home. Sure, they sell it for more than they paid, but did they factor in all their actual costs over the years they lived there? Did they replace the doors, windows, roof? Did they do major landscaping or something that they forgot about because it was just a normal expense at the time? Many people fudge the numbers to feel good at the time.


I generally agree with all of that but there are always exceptions. When I buy at $100 and sell at $200 after 6.5 years I am quite sure I made money on that regardless of maintenance, improvements, etc. made over that time. When I buy brand new at $100 and sell at $135 after no maintenance or improvements in 3 years, I'm sure I made money on that. 

The answer is as you said, buy below market to begin with. That makes making a profit a whole lot easier. Instead, what I see many people doing is buying a house someone else is going to make profit on.


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## Just a Guy (Mar 27, 2012)

True, but when you spend $100, then another $10 to paint , $25 for cupboards, $10 for landscaping, all of which you wanted for a better quality of life and enjoyment, when you sell at $135, you’re still losing money you ignored.


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## Longtimeago (Aug 8, 2018)

Just a Guy said:


> True, but when you spend $100, then another $10 to paint , $25 for cupboards, $10 for landscaping, all of which you wanted for a better quality of life and enjoyment, when you sell at $135, you’re still losing money you ignored.


I don't think we are disagreeing at all. I wrote buy at $100 and sell at $135 with NO maintenance or improvements. That was a real life example of a condo we bought 'off plan' in BC and then sold before moving to Ontario. Even after our cross Canada moving costs, agent fees, lawyers fees, etc. we still made profit on that sale. Primarily because we bought off plan which was the lowest cost possible and prices immediately started to rise once occupancy was possible.

Our current house in a small town in Ontario was chosen because the area had the biggest 'bang for the buck' when ti came to what we could get for our money. Prices have risen over 100% in the 11 years we have lived here as more and more Boomers have left the GTA in retirement and pushed prices up all around Southern Ontario. Previous to our buying here, a house could easily sit a year or more on average before selling. Now when a house goes on sale in our little town of 3000 population, they usually don't take more a week or two to sell and some are selling over asking price.

But we have spent money on considerable improvements since moving in. So even though I know we could sell a double what we paid, I would not say we would make a profit on the sale YET. We have reached the end of all the improvements we wanted to make to make the house into our ideal HOME but we would probably have to wait another 5 years or so before the price will rise enough that we will be in a position to make a profit if we sold.

I think what we are both saying is that you have to be realistic about when a house becomes profitable depending on how much you invest in the house in the meantime. I agree many people are not realistic about that. But I will take exception to a broad statement that it is 'rare' to see someone who actually made money on a home. I truer statement I think would be to say that many people do not make a profit on a home sale. Rare is a step too far methinks.


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## Longtimeago (Aug 8, 2018)

What I like is to hear that house prices in Toronto hit an all time high last month. 








Toronto Home Prices Hit Record High In June


Toronto home prices surprised on the upside in June. Prices in Canada’s largest housing market climbed to a record high last month, and the local real estate board suggests there's no end in sight with plenty of buyers hunting for a home. The ...



www.baystreet.ca




.

That translates to me as, prices outside of the GTA will also go up as more people look outside the GTA for a price they can afford.

We have no intention of selling our present home but it's always nice to know prices are rising.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Typical question.


I recommend checking out Ben Felix on Youtube as he (PWL Capital) has several videos about buying vs renting.

One interesting thing I recently learned myself is that even though people talk a lot about how great an "investment" real estate in places like Vancouver have been, the long term CAGR is actually not very high. For Vancouver condo type of housing, it has apparently appreciated at 5% to 6% CAGR which is very much in line with conservative stock/bond investments like balanced funds. And this is supposed to be one of the hottest RE markets in the world!

Just not impressive returns, IMO especially once you consider all the fees, hassle, maintenace, not to mention the illiquidity. Yeesh.

I'm almost 40 and have never owned a house or RE. Instead, I've accumulated the wealth in my stocks/bonds/gold and that has been working out alright.

The one thing I would say in favour of owning a home (I don't really like the term owning, since you don't really own it until the mortgage is paid off) .... having a mortgage forces you to "save", because you need to make the mortgage payments.

The one risk of renting, and investing the spare cash yourself, is that you might not have the discipline to regularly save and invest. However if you are a disciplined saver, there should be no problem.


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## STech (Jun 7, 2016)

Just a Guy....

Isn't a bit condescending and self serving to boast about vast wealth built on dozens, and dozens of properties paid for by renters, while telling people they should rent and not own? 

Sorry, but that had to be called out.


15 years ago I did this same math and soul searching about owning vs renting. 15 years later, I thank my old self for deciding to buy. I'll tell you guys and gals one major glaring problem with all the math discussed here. In the next 15 years, nothing, absolutely nothing is going to follow a nice linear trajectory. Don't be surprised if house prices spike exponentially again, and don't be surprised if rents triple in 10 years. Pre-covid, lots of people were getting priced out of the rental market, who's to say that won't return?

Is owning for everyone? Most certainly not. If you want to stay mobile and travel the world, then you should own as few material goods as possible, and a house is a major no-no. If you want to settle, raise a family and grow roots in a community, renting will be a loosing proposition. Some people grow their net worth quicker by renting and investing in the market, but that's certainly not typical of the average family. If you're single, want to remain mobile, and know how to invest, then you certainly should rent as cheaply as possible. 

Staying mobile wasn't my thing 15 years ago. I bought, attacked the mortgage hard, and invested whatever was left over. Once the mortgage was paid off, I increased my investing tremendously, and let's just say I have been very happy with the results so far. Down the road, when child free again, the plan is to move to a place with lower cost of living. The dividends from the investment accounts will sustain us, and the dividends from the house sale will pay for all of our yearly travel expenses. Not a plan for everyone, but like I said, extremely happy I stopped renting.


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## kcowan (Jul 1, 2010)

I bought my first home when I was 25. It provided 80% leverage, forced saving, pride of ownership, a better neighborhood, something to do every weekend during the summer and optional projects in the winter. That lead to owning 4 other homes before deciding to rent 27 years later. I turned a $6k investment into $535k, ignoring all the other costs of ownership and churn.

Would I do it again? Sure if I were 25.

Then for 10 years I had no ownership in RE. Now I am back and just upgraded to my second condo after 10 years.

There was a structural change that took place in the markets in 2008. Money became cheap permanently and bonds have been poor performers making stocks more preferrable. So we bought again. It is cheap to own and money in equities will be safer long-term (post pandemic).

Is this the right strategy? It has worked out OK for us and it remains to be seen what will happen in the next few years.


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## james4beach (Nov 15, 2012)

I thought @Just a Guy was pretty clear in his reasoning, since he opened with: "Most Canadians move every 7 years"

The friction of buying & selling houses is immense. The fees, but also the work involved. I am so glad that I did not buy a house. I've moved between cities several times, and I'm not the only Canadian who has to constantly move for work.

After I left Toronto, I kept in touch with ex coworkers who owned homes in the GTA. They were stuck with them. For some of them, that meant being anchored down to the GTA where none of us could find work during those years. Another couple of friends had properties in Kitchener-Waterloo, and after the RIM collapse, had trouble selling them (they didn't want to lower their prices). So they moved elsewhere, leaving the house in KW, trying to rent it out from a distance. Huge pain in the behind.


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## Just a Guy (Mar 27, 2012)

STech, not really. How I make money has little to do with lifestyle choices. The two are unrelated. The ability to move quickly without having to worry about selling a house, being able to make more money for yourself by investing the difference between a mortgage and rent, etc. pare all legitimate benefits which has nothing to do with how I make money. If you can’t see beyond your own actions, you are doomed to make mistakes.

my son, for example, is still going to school. I advised him to buy a rental, not a house while he was in school. the profits he makes pays most of his rent, he is much better off not owning a home, regardless of how I make money. It’s the smarter choice for him to rent at this stage in his life. I also don’t own the place my son rents as it doesn’t fit my model. I make decisions based on logic, not just on cash.


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## Mukhang pera (Feb 26, 2016)

kcowan said:


> I bought my first home when I was 25. It provided 80% leverage, forced saving, pride of ownership, a better neighborhood, something to do every weekend during the summer and optional projects in the winter.
> 
> ...
> 
> Is this the right strategy? It has worked out OK for us and it remains to be seen what will happen in the next few years.


Similar experience. Bought first house at age 26 in Kitsilano in Vancouver. 

I have lived in rentals once in awhile since. Although, even when living in a rental, always owned other real estate, including owning at least one rental at all times. I have long thought it important to own some real estate. Not so much for investment even, but, at least in part, for the "pride of ownership" to which you refer. The rentals I have owned were always places I thought I would not mind living in myself. I have always owned some recreational property, even if just raw land. 

In more recent years, I have learned about buying forest lands. I wish I had learned about that sooner. Although it helps to live close to the location of such lands. Not sure I would have ventured into forestry while living in Toronto, or Los Angeles, or Manila, or a few other places I have called home. There are forests all over Canada, but the timber they produce, the growing conditions, how long it takes the grow, the species, the harvesting methods (which have already changed a lot where I am, since I became involved) the grades, the markets, all very different.

Maybe, had I lived in the Philippines earlier, investing in mahogany and a few other native hardwoods would have served well. At least if one can protect it from poachers. Anyone here recall Grew lapstrake boats, built in Penetang, Ontario? Always touted as be built from 100% Philippine mahogany. They were good boats. Sorry that fibreglass killed them. Along with Peterborough cedar strip boats. 

I hope LTA is not watching this thread. I'll get my butt kicked for straying off topic. I'll be told to start a new thread if I want to talk about boats. Sorry LTA, I'll go to my room now.


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## Fisherman30 (Dec 5, 2018)

As others have said, I think it's best to look at a home as a place to live, as opposed to an investment. What kind of lifestyle do you want? I rented for 6 years, but it prevented me from doing a lot of things I enjoy doing (I play a very loud musical instrument, which I had to go somewhere other than the place I was renting to practice), I like having a dog, I like woodworking, etc. The advantage of it was that I could take off and go for a trip whenever I wanted, never had to worry about paying for unexpected repairs/maintenance etc. I now own a house for about the same monthly expense as I would be paying to rent a similar property. I bought a relatively cheap older bungalow, it is well within our affordability, and should last us for years to come. I get to do all of the hobbies I enjoy, I can personalize the space however I want, and I really like the house. Will I come out financially further ahead this way? Probably not, considering I've had to redo the roof, install a fence, will be replacing the siding on the garage, bought a new fridge, and will be replacing the furnace, washer and dryer in the near future, but these were expenses I budgeted for and was willing to accept with home ownership. If I sell the house 5-10 years from now for more than I paid, it doesn't really benefit me that much, because all of the other houses I would consider upgrading to would have gone up in value as well, unless I were considering moving to a smaller town, which is unlikely. I would say I spend an average of $2500/year on home maintenance, my annual mortgage payments and property tax adds up to $16 320, utilities are $1615/year, and insurance is $960/year. Works out to $1782/month. Not sure about the city you live in, but I think the cost of rent for a 3 bedroom bungalow and a 2 car garage in my city (Winnipeg) would be approximately the same amount.


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## Longtimeago (Aug 8, 2018)

What all of this should tell anyone reading through the thread is that there is no right or wrong answer, only an answer that suits the needs and goals of an individual at a given point in time.

Mukhang pera, if you ever have the opportunity, I would suggest you visit the Muskoka Discovery Centre. There are a number of classic boats there that will probably have you salivating.








Muskoka Discovery Centre - Museum on the Muskoka Wharf in Gravenhurst


A glimpse into a bygone era, Muskoka Discovery Centre preserves and amazes!




www.discovermuskoka.ca




There's a decent Marriot Residence Inn right next door where you can stay.




__





Muskoka Hotels in Gravenhurst, Ontario | Residence Inn Gravenhurst Muskoka Wharf


Book an exciting vacation at Residence Inn Gravenhurst Muskoka Wharf, the area's only extended-stay hotel. Your visit will be met with complimentary breakfast and Wi-Fi.




www.marriott.com


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## Mukhang pera (Feb 26, 2016)

You are probably right about those boats LTA. 

My first wife's family had a place on Lake Rosseau and they had one of those gleaming wooden inboard vessels. Seems they were a _sine qua non_ of life on Lakes Rosseau and Joseph.

I also used to spend time in summers at Mountain Trout House on Lake Kawagama near Dorset. It was then owned by George Mackessy and his wife (whose name escapes me for the moment). As a teenager, I felt privileged to be entrusted with their beautiful wooden boat of the sort now seen in the Discovery Centre you mention. They referred to it as "the launch", as in "Mukhang pera, would you be so kind as to take the launch and run these good people out to their cottage in Minden Bay?" Heck, I would have paid for the honour, although in that time and place, "the launch" was regarded as not much more than a work boat. All cottages (the few that there were) on Kawagama were water access only then. I think there's a lot of road access now, more's the pity.

There were a number of small, custom boatworks in the Muskoka and Haliburton region making fine vessels in them days. Nice to see some of their craftsmanship preserved. Or is that now craftspersonship?


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## sags (May 15, 2010)

Home prices generally go up in % terms, so a more expensive home in a desired area will gain higher capital gains that a less expensive home in a less desirable area.

All you have to do is look at price rises in the GTA, Vancouver and some other select cities to see examples of that.

There are nice homes available for sale in New Brunswick today for $170,000, but the price is low because people don't want to move there.


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## sags (May 15, 2010)

As to rent versus buying........in Ontario we have rent controls and anyone who has a rent controlled unit is laughing all the way to the bank.

Our rent is $1100 a month plus $80 hydro and $20 a month for renter insurance. That is it......and we get free membership to a private club with pools and a gym.

No mortgage, condo fees, municipal taxes, maintenance costs, water or sewer, heat, or home insurance.

Where someone else may pay $2,500 a month for a similar newer unit that isn't rent controlled, it may tilt the factors towards buying.

We have a 3 bedroom townhouse in a nice area. Park right behind us. For us it is a no brainer. We will keep renting until we croak.


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## sags (May 15, 2010)

I bought an old 1960s boat from a guy and spent all winter in the garage restoring it. Took it up north to our trailer spot and docked it there.

It was a nice boat, steel with a Volvo Penta inboard engine. The exhaust was above the water so it roared pretty good.

I went up a few weeks later with 3 other guys for a weekend.

On Sunday, another trailer crew decided to start building a deck and they were sawing and hammering away.

One of the guys I had brought woke up hung over and all cranky and said he was going down to the boat to sleep due to all the noise.

A couple hours later we pack up and leave. I didn't think to check my boat because I hadn't used it that day.

I get home and a couple days later the marina owner calls and says......."I got good news and bad news, which do you want to hear first ?"

I said it doesn't matter and he says....."we got a torrential downpour on Monday and your boat sank at the dock. It tore the cleats right out of the dock. It was sunk to the bottom and blocking the way so we had a crane pick it up and unfortunately the chains crushed the side of your boat. I said "what's the good news" and he said "you got insurance, right"

I had insurance, but as it turns out the guy that went down to sleep in my boat dropped the cover over the side and it sank because it filled up with water.

He didn't bother to tell me about it. If he had off I could have fished it out. It was only down in about 8 feet of water.

Lessons learned......don't let people hang around your boat, always check to make sure the cover is secure before you leave, and old boats have very little built in flotation. When they fill up with water they sink like a rock.


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## Prairie Guy (Oct 30, 2018)

sags said:


> As to rent versus buying........in Ontario we have rent controls and anyone who has a rent controlled unit is laughing all the way to the bank.
> 
> Our rent is $1100 a month plus $80 hydro and $20 a month for renter insurance. That is it......and we get free membership to a private club with pools and a gym.
> 
> ...


No wonder you love socialist leaning governments...they punish landlords to reward people like you.


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## sags (May 15, 2010)

Prairie Guy said:


> No wonder you love socialist leaning governments...they punish landlords to reward people like you.


The landlord built the units in 1967. They probably paid less than $15,000 for them. They are making lots of money at the current rent.

That is what rent controls do. The landlords get a fair rent for what they paid for the property. They don't get to charge 2020 rents for a 1967 unit.


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## Longtimeago (Aug 8, 2018)

Mukhang pera said:


> You are probably right about those boats LTA.
> 
> My first wife's family had a place on Lake Rosseau and they had one of those gleaming wooden inboard vessels. Seems they were a _sine qua non_ of life on Lakes Rosseau and Joseph.
> 
> ...


You might be surprised to see how many are still around and how relatively inexpensive it can be to own one.




__





classic-antique-wooden-boats-for-sale | Port Carling Boats - Antique & Classic Wooden Boats for Sale






www.portcarlingboats.com


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## Prairie Guy (Oct 30, 2018)

sags said:


> The landlord built the units in 1967. They probably paid less than $15,000 for them. They are making lots of money at the current rent.


So you're jealous because they're making money...typical socialist.



> That is what rent controls do. The landlords get a fair rent for what they paid for the property. They don't get to charge 2020 rents for a 1967 unit.


You charge rent in 2020 based on the 2020 rate, not what rent was in 1967. Would you work for a 1967 salary?[/QUOTE]


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## sags (May 15, 2010)

_So you're jealous because they're making money...typical socialist._

No, I am happy they are making lots of money. It keeps my rent payment down.

_You charge rent in 2020 based on the 2020 rate, not what rent was in 1967. Would you work for a 1967 salary? _

Did they pay the same for the rental unit in 1967 as a new one would cost today ? This affects the landlord's competitors........not me.


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## Just a Guy (Mar 27, 2012)

Too bad we don’t still have 1967 expenses or property taxes. Sags is so blinded to reality.


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## STech (Jun 7, 2016)

Just a Guy said:


> Too bad we don’t still have 1967 expenses or property taxes. Sags is so blinded to reality.


Easy solution. Claw back all of his social benefits to 1967 levels.


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## Just a Guy (Mar 27, 2012)

You can’t do that, it would be unfair. Ask any socialist your money is their money. You earn it, they spend it, equal responsibility, fair division of wealth. Just don’t touch his boat, that’s his.


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## STech (Jun 7, 2016)

Well I'm not saying take it away, just freeze it in time and don't let it grow, much like his maturity.


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## Prairie Guy (Oct 30, 2018)

sags said:


> Did they pay the same for the rental unit in 1967 as a new one would cost today ? This affects the landlord's competitors........not me.


It doesn't matter what they paid for a property in 1967 when determining rent in 2020.


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## AdamWalker (Aug 14, 2020)

With tax incentives, the way our economy is structured to favour debt over currency, and the endless rounds of money printing (quantitative easing); buying is not a choice, it's a necessity. It's just a matter of what you buy, where you buy, and whether you buy it as an asset that generates cash, or an asset that functions as a store of value. 

Oh and also, _when_ you buy... of course.

In fact: I was planning to buy a property this year (2020). Then covid happened...

And here's the thing: While the real estate agent I'm working with has been very helpful, and I've been able to get considerable access to data to crunch my own numbers to see what's really happening with the market; I'm still on the fence, favouring renting until this thing is truly resolved. 

Where I live it looks like a sellers market. It acts like a sellers market. And agents are telling us that we should make competitive offers. But I'm not buying it!

We haven't even begun to see the actual economic fallout, nationally, let alone globally. In the 2008 crisis, delinquency rates for *just* sub-prime mortgages rose from ~5% to 18%; and we had a price collapse ranging between %20 to %50 (depending on where you were and what property you were talking about). Last I checked, the delinquency rate collectively for rents and mortgages across all buckets are around 40%!! It's scary. I think it's scary to a degree that the human brain is incapable of comprehending; like how we can't mentally visualise the difference between 1,000 and 1,000,000 effectively. 

Plus when the head of the Bank of Canada comes out and claims that they are pinning interest rates to the floor for the foreseeable future; I favour doing the opposite of what the majority is expected to do. I did that in the 2008 crisis, and ended up selling my home back then for a windfall profit.

So... I wouldn't tell you what to do. But I'll tell you what I'm doing: Staying approved for finances, watching the market, seeing properties (virtually or when they are empty), paying attention to government meddling in the market via policy changes and forbearance packages, and positioning to buy the dip.


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