I’m calling my real estate agent today!

Mike

Bottom line - it makes sense in some locations and not in others. If I lived where you did, I’d be happy to gloat about being a renter.

No matter if you rent our own, its still more about money management. How you manage the extra $ you receive beyond your costs of living and borrowing.

I wish those losers would have told me how expensive home ownership would be!

I’ve always kept mortgage payments high as I know that cash sitting there seems to get spent easily.

Certainly if you are a well disciplined renter, as is your partner if you have one, then renting makes a lot of sense in some communities, but not all.

This is more of a post explaining why we rent rather than encouraging readers to sell their homes!

I think this strategy will work out well for us given that Vancouver real estate is more expensive than public companies, plus both my wife and I are disciplined savers. i.e. we don’t need a mortgage to force ourselves to save.

Sooner or later, people will have to learn to save without a mortgage. After all, how can you retire with a paid off house but no money in your bank account?

With that said, I know some real estate investors who make a lot of money… by investing in real estate… but they don’t consider thier homes an investment (unless they are willing to sell it after it appreciates and move to A DIFFERENT AREA where real estate hasn’t appreciated… then it might be an investment…)

Income Trusts (some REITs in particular) can pay around 10%… for the price of a home in Vancouver … lets just use $500,000 as an example (poor mans house, I know the avg is closer to $1 mill)… if that money was put in a REIT/Income Trusts at 10%, it would produce $50,000 a year! I don’t know too many people that pay $4,000 a month in rent… No repairs, and no mortgage each month… in fact the Income Trusts pay you to own them. I see where your coming from!!

I would personally like to own a home, but it wouldn’t be my primary investment, haha.

Some of the properties are being kept for the long term (30+ years), so it isn’t all for flipping

But majority or real estate “investors” are just flippers, you’re correct.

We’re paying a premium price ($1,450/month) because of the pet — think of this as the worst-case-scenario. The condo we’re renting can fetch for $360k, so that’s a rent yield of 4.8%.

This is cheaper than the 5.79% 5-year fixed rate plus other carrying costs such as property tax, condo fees and insurance.

In short, I’m saving tons of money by renting.

I also live in Vancouver and have been renting in Kitsilano (nice, close to downtown neighbourhood) for 4 years so my rent is reasonable at $930…One bedroom condo’s start at $360,000 and go way up from there. We have adopted a rent and invest the difference strategy, and maybe one day wait for a return to real estate sanity….

In Toronto, $1450 rent gets you either a new-ish 650-700 sq. ft. in a prime location (downtown or mid-town) or 800 sq. ft plus condo on the downtown fringes or uptown.

Financially one of the greatest advantages of buying vs. renting is the fact that eventually you own the house, whereas renting theoretically will go on forever. Similar to leasing vs. buying a vehicle.

Another advantage of home ownership is the power to leverage. For most people it is much easier to have the ability to utilize large sums of other people’s money for your mortgage vs. investment loan. In other words it’s easier to qualify for a large mortgage vs. a similar amount of money in the form of an unsecured loan for investment purposes. This leverage allows one to have more buying power, and hence potential ‘capital gain’ power. The interest rate which you are able to obtain is typically lower on mortgages as well.

MoneyGardener – You’ve made some valid points about buying vs renting, which is why I prefer not to generalize too much. This article describes my situation.

To append a few more points:
- Although mortgage rates are typically lower than investment loans, mortgage interests aren’t tax-deductible.
- Rents are forever, but so are the dividends from stocks. In fact, dividends grow at a faster clip than rents, so eventually you’ll have surplus over and above your rent obligation.
- Depending on your province, dividends are often more tax-advantageous than the implied return from homes. For instance, a Vancouverite with an annual income below $60k will receive his dividends in full PLUS additional tax-refunds.

The only real financial advantage of buying over renting is the power of leverage, and this will hold true as long as rents > interests + housing expenses.