buy vs rentIn this three-part series, we’re going to look at the never-ending debate of Renting vs Buying. Today we’ll look at the advantages of renting vs owning:

The Advantages of Renting a Home

  • Maintenance Hassles and Expenses – when the toilet gets plugged, tenants get to call their landlord. It’s not nearly as much fun when it happens in your own home (trust me). 
  • One Easy Predictable Payment – owning a home involves more than just paying your mortgage. You need to factor in property taxes, maintenance, condo fees, water and sewage bills for houses, utilities, higher home insurance, etc.
  • Not happy with your neighbourhood? You can move every year. Tenants have the ability to easily and affordably move every year if they want to; the real financial benefits of owning happen over time. If your time horizon is short, consider renting instead of buying.
  • It’s cheaper to move when you’re renting. Buyers have to pay land transfer taxes when buying, commissions when selling and legal expenses for both. We’ll look at the real cost difference in tomorrow’s blog.
  • Sometimes it’s cheaper to rent. On a monthly basis, your overall expenses will often be cheaper when renting instead of buying. That’s especially true if you don’t have much of a down payment.

 

The Advantages of Buying a Home

  • You’re paying your own mortgage instead of someone else’s. While part of every mortgage payment is interest paid to the bank, part of every mortgage payment goes towards building equity. Think of it as a forced savings program. 
  • If property prices go up, you reap the rewards, not your landlord. Of course that works in reverse too – if prices go down, the hit is to your pocketbook.
  • Sometimes it’s cheaper to buy. Toronto’s rental market isn’t easy or cheap, especially if you’re looking to live downtown. If you have a decent downpayment, it’s often cheaper to own than to rent.
  • Freedom! When you own your home, you don’t have to ask permission to paint the walls – do as you wish! Buy new appliances, replace that carpet, paint that wall red and make your home your own.
  • Where else will you put your money? One of the reasons that so many investors make real estate a large part of their portfolio is that historically, Toronto real estate has been more predictable and yielded better returns than many of the investment alternatives. Of course there aren’t any guarantees, but if you’re renting and blowing the rest of your money on lattes and trips to Cuba, buying will be a better long-term financial plan (sorry Starbucks).

Tomorrow, we’ll look at the real cost differences between renting and buying.

 

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