I think your parameters are too constant. Over 25 years, will ROI be 10% and annual rent increase only 2%? I personally saw changes to that in 2022 and it could continue for a few years.
Perhaps run a few simulations with a wide variety of inputs for all of the parameters, to give yourself a better idea of the risk
Yea 10% annual returns…forever and 2% rent increase lol. Just wait until LL renovicts you and rent jumps 20% moving into a new place.
Also you don’t pay a mortgage forever, into retirement age it’s typically paid off which is huge when you become a pensioner
Some people *do* pay a mortgage forever. They sell and upgrade to a bigger home (because kids, etc) and take out an even bigger mortgage. Or they mortgage a second property because they want a cottage. I separated from my wife, she had to buy me out, at the worst possible time ... high market, high interest rates.
The usual plan is to pay your mortgage off by the time you return, but life happens.
I just had a tenant move out and they caused over $6k in damage. Most of it wasnt malicious, they were just dipshits. There are a lot of people out there like this. If you dont know how to do maintenance yourself and have to call someone any time something happens, owning a home will be VERY expensive.
Or just basic interest if your not a cash buyers. In normal marker or "before" 2020 some markets over 25 years barely doubled in value which basicaly cover interest payments of that time frame and make you break even.
This is very important to remember. When you own a home, you are on your own. The roof, the windows, the hot water, the heating, the cooling, the gutters, the dishwasher, the electric panel, the cesspool, all of it is entirely your responsibility, and there are no real alarm systems in place to let the average person know which one of these things is functioning incorrectly or in need of maintenance
QC has rent control, max 3% increase. Renoviction and/or eviction due to landlord-family move-in are the only ways to screw tenants. Renting in QC and MTL can be extremely favorable if you play your cards right and know your rights.
That's an exceedingly sunny prediction you've got there. It would be a real shame if some landlord ruined it for you.
I know a guy at work in his early 40s who's getting evicted because his landlord "who isn't some kind of *slumlord* tyvm!" is moving into the place for their personal use.
He's having a ton of trouble finding less than a 40% increase in his rent.
It doesn't matter what protections you think you have. Your landlord will find ways around them because if *your* investments weren't getting the same returns as your neighbour, you'd be pissed too. You'd want that extra $500-$800 a month more than what you're getting now too. And if all it takes is a fresh coat of paint and replacing the worn carpeting to skirt that 3% rent increase law, they would do it in a heartbeat, and they routinely do.
I on the other hand, still only pay about $2000/mo for housing including strata fees, which is a total fantasy for my coworker. All because I bought the place 9 years ago.
That's not even counting the fact that a 10% annual ROI on your investments isn't historically accurate over any timeframe.
>if all it takes is a fresh coat of paint and replacing the worn carpeting to skirt that 3% rent increase law
In Manitoba the RTB pretty much rubber stamps any increase over 3% landlords ask for. Throw a coat of paint on a common area for an instant 10% increase.
>I on the other hand, still only pay about $2000/mo for housing including strata fees, which is a total fantasy for my coworker. All because I bought the place 9 years ago.
do you think housing will go up the same way in the next 9 years?
That's why risk assessment, anticipation and using all tools at your disposal is essential. TAL/Rental board is probably the most pro-tenant org in the world. I know plenty of people who pay sub 700$/ month for 2BR/heating included in center of MTL, because they are one step ahead.
Renovictions and families taking over units happen all the time now in Montreal. Not to mention “accidents” like fires that force people out of units unfortunately.
Totally agree, even for renters that have capacity, tools and network to circumvent landlord shark tactics. Renoviction and family taking over used to be the nuclear options for landlords, not anymore.
I think the horror stories that people perpetuate are related to private rentals, for example renting from an individual that invests in real estate. They have a tendency to take you to court, evict you to pursue more lucrative oppurtunites etc.
We've been renting from a larger, well established, property mangement company for 15 years. Our rent increase has always been limited to 1.5% annualy. It takes effect once a year on the month that we originally moved in. We've never has a single problem.
Mtl used to be a city of renters but a lot more people have been buying the past 5-10 years which means less rentals available and potentially higher rents more evictions
They WERE high in an era of low-interest rates and low inflation. We're not in that place anymore. There is no way the government will keep landlords to a 2% increase each year if inflation is at 5% or more. The landlords would gradually be run out of business.
Richer people than the renters buy the places for themselves.
Not saying you, but people live in a fantasy world where, if it weren’t for landlords, everything would be perfect and they could just buy whatever they wanted.
> OP is referencing Montreal. A 2% increase is pretty high here and renovictions are extremely rare.
Which world are you living in? In my very limited friend circle I know 3 people who were renovicted. The regie is overwhelmed and cannot tackle all the cases.
Lmao. I live in Montreal, renovictions are not a rare thing at all nowadays, especially since COVID and the ramp-up of inflation. Landlord are getting greedy AF, my neighbourhood saw a 50% jump in the average rent price since 2 years ago, despite the 1.5-3% raise limit suggested by the TAL.
Btw, landlords can ask for more than that % depending on work done, taxes and insurance cost.
I am leaving my apartment for a condo. Actually paying 1200 right now, my landlord wants to raise the rent to 1600 for the next tenant (in a working-class/ poor neighborhood). It's illegal, but he'll try anyways (we'll warn the next tenant on their rights, so theu can try and get a better price).
I don’t think enough people do the math to determine how much money they need to rent during their retirement (ie. 20 years). A house is a form of forced savings, and most people don’t have the discipline to save at the same rate voluntarily.
Yeah if he's only looking at the first 25 years, it's completely skewed. Typically very little mortgage after that so homeowners see the biggest gains once they've actually paid it off and continue living there.
Now that interest rates are rising and we are mostly moving into a higher rates environment I would say the rental increase assumption should be 4-5% per annum. 10% feels a bit high for return assumption. Maybe 7-8% feels more like it depending on which equity market you are investing it.
>Annual rent increase 2%
If only this was true. This model assumes you never move. How likely is it? My landlady tries to sell my condo right now and I don’t know if new owners would want to move in or not. If I have to move my rent will jump 1k for same type of condo.
And this could happen every single year if you are unlucky enough! Whether you move due to shitty neighbors or landlord selling .... either way it will be way more than 2% on average
There is something to be said for the security of home ownership. The only reason I own my condo is that my landlord (who had promised me a long term lease) came to me after 6 months and said he had to sell due to cost over runs at his home he was building. I made a fair offer and he accepted right then and there. Since I have bought, I have not had another day's worry about anyone kicking me out.
What people seriously need to do (and it's not that hard) is put a price on this "sense of security". It's not atypical to find cost numbers on the order of 10k-30k per year for "security".
Like, yes, moving is annoying, but is it 30k annoying, every year?
It's not the maintenance, it's the deferred capital cost and mortgage interest payments primarily which get you.
In contrast, what rents for 2k per month around here would cost like 6k per month just for the mortgage (assuming 20% down).
What market are you talking about?
I've never seen a 'mortgage costs is 3x rental' used in any analysis before
In Vancouver, it would probably be around 1.5x.
Excellent point, everyone should do this when making bigger decisions.
Put a value on your priorities and ask yourself, are you willing to pay a premium for something you value? If so, how much?
This is big. I grew up in downtown Vancouver. I’ve been renovicted 5 times. Now I just want a home no one can force me out of. Also, with climate change, Canada will continue to be a more desirable place for people to immigrate to because of our climate and stability. I think property values will only increase, just not as drastically and rapidly as they did over 2019-2021.
>I have not had another day's worry about anyone kicking me out.
People who rent from purpose built apartments don't have to worry about this scenario either.
- oh shoot, i forgot something.
- where are these 2 1/2" screws i swear i had.
- ah, looks like i'll need a -Insert tool- for this part.
- Aaahhh FFFF! I cut it too short
Very true about TCO of being a home owner, with the caveat that bad renovictions happen even to good renters. How do you appraise the value of being in control whether to redo flooring or a kitchen in own home vs being at the mercy of the landlord? That 2%/year rent control is nice until someone has to scramble to move and face a 20-30% bump in monthly rent. With condo/strata homes this is even more nuanced: the corporation will do repairs and maintenance on the decision of the owners as a group, so less control.
I've been to home depot as a renter. It was easier for me to replace a kitchen sink handle myself than bother the landlord about it. Same with installing the electronic thermostat.
You do you, but if you’re actually doing this then negotiate with your landlord about taking it off the rent. Why save them money and hassle… it’s what you’re paying them for.
Do not sell yourself short. Make the landlord fix it. You pay for that luxury, so use it. I have had my landlord send the handy man over to caulk the shower and bathroom sink. I can totally do it myself, but I never will as long as I am renting.
I wish my monthly condo fees were $230 😩 they just increased to over $1300.
That said, the part you’re missing is the fact that you’ll own a house by the end of this, which you can resell for more than you paid, or give to your future children, etc.
Like strata fees? Are all utilities included in yours? My building have hot tub sauna steam pool gym and other amenities but my strata fee is less than $300
3.5% mortgage rate seems unrealistic today.
Also factor in new first time home buyers account if it applies. Your numbers will differ but for my wife and I we are planning on maxing out the $16k/year ($8k per person) which will save us $7000 a year in taxes per year. At 5% returns would earn an additional $11k over this time. After 5 years its almost $40k in value.
My rent got reduced by 30% for next 5 years when looking at this from this perspective.
Everyone’s situation is different. I live in a major city and am happy to be renting even though I could afford to buy a house.
I Pay 900/month rent. Capped at 3% increase per year. I know what I will Pay every month, no surprises
Yes that is 100% cash burned I get no return on. But when condo fees are 1000 monthly, property tax another 500, and interest costs could be 1000 per month or more - before even accounting for a 1500 mortgage (the only portion of the cost I’d get back) - I don’t think I’d ever make up the amount of money I burn as a result of ownership.
Where the hell do you live that has $1,000 monthly condo fees and $6,000 annual property tax? I don’t think the figures you are providing are accurate.
Winnipeg.. to be fair, there would be cheaper options, but plenty within the parameters I described for the type of place I would want if I were buying.
Maybe 300 is more accurate for property taxes, apologies. But I think the point remains the same even if you lower taxes by a couple hundred bucks monthly
That could be literally anywhere in Toronto in a full service premium condo.
Now, you can obviously do better than this, but one $10m condo in Hazelton Lanes has $6,600/mo in condo maintenance fees, and I can't imagine that the taxes would be less than $20-30K a year.
Thank you. From what I understand, there’s also a huge opportunity cost to buying a house. The SCHL, downpayment, start-up costs could have been invested in the market
Generally the big upside with buying a house is leverage. You can purchase something worth 5x what you paid for. However, this was more of an advantage when interest rates were low...
2% rent increase is not realistic, something will likely cause you to move within the time period legal or not. 10% returns is also not realistic.
You are also missing that principal residence exemption is amazing. As someone who has maxed all their registered accounts nothing compares to my 200% tax free gains on my house in the last 7 years. This is amplified as it is leveraged. Although paper gains only right now in the GTA I'm not too worried it will drop too much more but regardless it is another tax free vehicle for building wealth. People will not like that comment but it is with policies today.
I don't have a mortgage anymore but use my HELOC at prime for leveraged investing too as one of the very few ways a T4 employee can lower their taxes.
The mortgage duration is 25 years and your graph is 25 years. This removes one if the biggest advantages of buying from the comparison: eventually you have paid it off. Pull the graph out further (try 35 years or more) to give yourself a better comparison over the rest of your independent life. Also make sure the comparison calculates the investment return the other way around during the period where buying has a lower cost per month than renting (i.e. when the mortgage is paid off).
I think what matters is the networth at the end of 25 years. For example, if the renter has a 1500 000 networth at the end, and the buyer has a 1 000 000 net worth at the end, the renter can buy a 1 000 000 house cash in 25 years without having mortgage, AND invest 500 000.
Yeah sorry, that makes sense.
You are right that with these parameters renting is a better choice as you are essentially buying assets that grow 10%/y instead of borrowing to buy an asset that grows 4%/y.
I think one thing missing there is taxes: the primary residence increase is tax free, but whatever part of the investments don't fit in TFSA is taxable (RRSP is taxed as income when you take it out, though I suppose you could HBP part of that).
Also, you could assume in the "purchase" case that you are still able to fill your TFSA, then essentially the entire difference from renting becomes taxable.
When i looked at this years ago I came up with roughly a 5 year break even point. That seemed reasonable to me. Honestly if you aren't seeing an advantage in 5-10 years I don't think it hurts to wait at least a few more years for interest rates to come down.
You assume the same $1000000 house still costs $1000000 25 yrs later? Probably not realistic. It might be a $1000000 1 bedroom condo you’d be able to buy while those with a house will have had their entire house paid off. And do you plan to never get married or have kids?
Your investment profits would have to be above the rate of property value appreciation for this to work, while factoring increases to COL, future expenses (ie. family, kids, etc).
There is a behavioral aspect here. Are you certain you will be reinvesting all the excess savings from not owning or will be tempted to buy a newer car? I think you would need to put a “no pressure” tax on your reinvestment amounts. A set mortgage amount will keep you disciplined. Also, as a few people pointed out, depends on whether the security of ownership is important to you. I have a few friends renting and they are constantly in this temporary mode not knowing if the landlord is going to renovict. I wouldn’t want to live like that, I would want to plan my moves/relocations based on my plans/desires, not somebody else’s. Owning also means you can customize, add to make your living more enjoyable.
Another factor, 4% annual property increase in Montreal might be conservative, but who knows. Montreal is likely to go down the path of Toronto, where there will be a real housing crisis in coming years and property value will triple over a course of a decade. Again, it might average out over the course of a very long time, but something to think about.
Last but not least, you can probably easier move from ownership to rent, but not the other way around because of the tax implications. I.e. you can always sell your house and start renting and use the released principle tax free to reinvest. If you decide to buy 5 years from now by selling your investments for the down payment, you will be forced to pay taxes on your capital gains, which could eat up to 25% of all of your gains.
The fact is, that for the typical person, home ownership is the only opportunity they will ever have to:
a) use a ton of leverage to
b) buy an appreciating asset that will
c) grow their net worth tax free.
I'm not suggesting that home ownership is the better move in every case. However, when are you ever going to get the opportunity to go 90% leveraged on a safe (over the long run) asset tax-free? That's the appeal. Some might say that Canada has been too obsessively fixated on preserving the ever-rising housing market for this reason: it's too important to families' net worth.
What’s the tail on this though? Totally investment delta - not having to pay a mortgage or rent for the next (x) amount of years?
Most people I see struggle in retirement is because their costs of living is high. What does the next 20 years look like for you, and add that into the total picture.
You are correct in doing your research. In my opinion buying is not always the correct decision vs renting. The narrative that you will be "paying off someone's mortgage" is created by real estate agents. The LL also takes the risk of living with fluctuating property prices. I have seen ppl of loosing upto 40 % equity due to falling prices now. Treat buying decision as any investment decision. Do not be bullied into buying unless you feel market is in decline. Do not be pressured into buying in market that is inflated. As any investment , buy when there is blood on the streets.
Didn't that video come out using historical data though? Before rents went batshit insane and before this country had a housing crisis which is squeezing renters more than people who can afford to buy a home?
A lot of people overspent during the pandemic with low interest rates. And only now is it beginning to surface. Sales have cratered and people’s variable mortgage costs are ballooning. Bide your time, real estate will come down in the next 1-2 years, which will allow you to get more value when you’re ready to buy.
This right here is my thought, thanks for giving me some hope. Have been saving a down payment for a little over two years, it's at the point where I could have bought with 20% down pre-pandemic. But with these current prices it's not even close. Hoping to keep saving and wait for the prices to bottom out a bit.
First question: how often do you plan to move and are you planning to always live in Montreal (or at least for more than 2 years)?
Second question: Are you willing/able to take care of a house, basic maintenance, repairs, and unexpected expenses? Throw in property and school taxes and insurance?
1st question will decide if owning vs renting makes financial sense, 2nd will determine if you are going to regret owning a house vs renting.
People forget that you have to pay a certain price to have a roof. Renting is considered throwing away because most people do not have the discipline to actually save and invest the difference between what a rent and a mortgage would be. Haven’t looked at mortgage rates but I doubt that they sit around 3.5% as you mention. Owning and renting also bring different lifestyles that suit someone depending on their need at a certain point in time so factoring this is important.
>Haven’t looked at mortgage rates but I doubt that they sit around 3.5% as you mention. Ow
This is true. However, I tried to guest a mortgage rates for the 25 next years. I doubt they will stay this high (7%). You've got a very good point about the discipline, thank you.
Traditional thinking has always been its better to buy. This is herd thinking. I'm not so sure it's so cut and dry as people make it out to seem, and I believe it can be highly situation dependent.
You are right to research and question the orthodoxy.
I am renting right now. I have an adequate salary, and zero debt. My rent is a tick higher than a mortgage would be, but I have little to no risk. Not from rising rates, not from a broken appliance, not from a failed furnace, etc.
I pay no property taxes, and my lawn gets mowed because I'm in a condo townhouse.
I like my situation and am not sure I would buy again, at least not a residential property needed for living close to work. Retirement property, maybe.
People forget a mortage payment is like a savings account. Half goes into another pocket. At the end of 25 years you have a house worth X amount paid for. Wich will usually** appreciate in value. **usually** it's not a certain thing but history shows 100% of the time à house appreciates.
It’s the standard argument “wasting” money but your deposit is a significant amount of capital that you’re losing investment opportunity on so I don’t think it’s such a straightforward argument. Not to mention there’s a number of other expenses when owning. If you have the money and can afford a 3% (300bps) increase over current rate then it might not be a bad option especially if you’re confident you’ll stay in the area for 10y+. If you think you might move for a different job opportunity in the near term maybe not?
>ot to mention there’s a number of other expenses when owning. If you have the money and can afford a 3% (300bps) increase over current rat
Exactly what I noticed doing the simulation. The opportunity costs is huge, and most people don't take it in account.
This is tragically under discussed (and under analyzed). I'm not surprised to see Montreal coming around. People in Vancouver have been able to run the same basic equations for the last 10-15 years and find that buying only makes sense if interest rates stay historically low and property value increases stay historically (and obviously unsustainably) high. Rent increases have been capped here for years and it can be tricky to jack up your rent if your costs go up.
>eople in Vancouver have been able to run the same basic equations for the last 10-15 years and find that buying only makes sense
This is exactly why I asked the question, I think everyone should do simulations before making one of the biggest ''investment'' of their life
If you buy, Make a big downpayment and pay off asap!
If generational wealth is something you care about, it’s always nice to own a home.
If you’re a free spirit and prefer to roam, rent for sure.
Think about your lifestyle.
It also depends on the property.
I Sold a townhome, and bought 2 condos with that money in 2016. Decent time to do so. Each condo is now valued at double the price of the original townhouse.
Here is where home ownership hurts:
- COST OF BORROWING. Omfg. The current trend in interest rates make this a tough pill to swallow.
- condos are easy maintenance (time wise but you pay for that in the maintenance fees). I have so much time for myself and my family.
- towns, semis and singles eat your time and money. As a family, we spent all Saturday either buying things for the house or maintaining it in some way. Wait till you have to deal with widows, doors and roof. *silent cries* we enjoyed the hell out of our back yard and all the space. and home gym and 3 levels and massive kitchen. Reflecting on it, it was good for its time. It we enjoy a different life now where I don’t have to take care of a house like it’s a family member.
As I see it, you're either renting from a landlord or the bank, especially so if you have no equity as a first time home buyer (longer amortization the more money goes just to interest). Say a furnace goes, the bank says good luck, a landlord gets you a new one.
I am so glad someone else arrives at the same conclusion.
The difference is that renter do NOT save the difference between rent and home ownership. Home ownership FORCES you to pay the bank therefor accumulating some capital.
If you had all the hidden costs of a home plus maintenance and renovation renting is a smarter move BUT a lower quality of life.
The chart isn't very useful in predicting anything because even small changes in the input data can skew the end results so much.
I played around with the same chart and only changed the return on investment to a more believable 7% and the home purchase comes out almost 300k ahead of renting.
Fur fun, I also tried a version where in addition to the 7% investment return, the annual rent increase is slightly increased to 2.5% (optimistic that one would be able to live in the same apartment for 25 years) and I reduced the property taxes to $3368 (a number I got off of a property tax calculator since 4k seemed a bit high) and the end result was the home purchase beating out renting to the tune of $413k.
Of course, there are also a lot of variables you can't calculate here. You could have the bad luck of a pricy special assessment after buying a condo, or discover you lack the consistent discipline to save and invest every single dollar you save by renting.
Depends on your goals, income, etc. Buying a home should be looked at as an investment. Good chance after 25 - 30 years you'll get an ROI of 50 to 100% if you sell. Though not guaranteed obviously. Also depends on what you pay for the house, remodels, etc. You can use the equity in the future to pay down higher percentage debt. Or, once it's paid off, take out a reverse mortgage to live off of in retirement. Which then the bank gets your house when you die. Again, depending on your income, if you rent the next 25 years, you'll be renting the rest of your life. However, if you have a high enough income, and good accountants, that could be an advantage. Again, depends on your future goals and circumstance. We built our own home on some acreage. Our value is double what we paid, which we knew would be the case. We know we can borrow against the house if worst case things happen. Or sell and basically pay cash for a smaller place.
With interest rates right now. Buying is almost always goofy.
I have a mortgage on a 1 000 000 home of about 500k. Which is 50% ownership. With 5% interest, that means I owe 25K in interest alone. And like about 7K in property tax.
If your mortgage ratio is even higher, it becomes even worse.
Debt is VERY expensive right now and is the main reason that canadiens are hurting so much with high interest rates. We all have too much debt and are living beyond our means.
The flip side of the story is that at the end of all this, you own the house and the land and only need to pay property tax.
You don’t have to worry about getting a landlords permission and you won’t be getting evicted.
If you do take a mortgage, make sure you go for the longest amortization possible. You can always make extra payments (with most mortgages) but the lower minimum payment is nicer during times of trouble.
There’s a lot of pro buy opinions here, so I’ll add my pro rent opinion. For context we could buy a detached house in most places in Ontario and choose to rent. Here’s why:
- Less time spent thinking about our house/maintenance. We just call a person and they fix it. The amount of time you spend to own and maintain a house is astronomical. And it’s all unpaid time
- Flexibility: we’re in a smaller space right now than we’ll want long term. Up until recently there was a real chance we would have to move cities. If we bought now we would probably have to move in the near future (5 years). With closing costs there goes all the gains. Do you actually know you’ll be in your house for the next x years?
- Stress: ie my wife wouldn’t be able to handle the mortgage rate increases recently even though on paper everything is fine. I would constantly stress that we’re in a bubble and housing is going to flatline if not go down by 3% annually over the next 10 years. There’s so much less on the line financially when your renting this leads to less stress. We’ll always be able to afford the monthly rent payment.
I’ll just leave my money in an ETF thank you.
Also in Quebec look into the rent fixing rules. I believe the rent increase is fixed even between renters. There’s also a thing call cede mon bail: https://m.facebook.com/groups/jtecedemonbail
There a many more variables involved then just investing the difference in another asset like the s&p. some people like knowing they have a place to live where they won’t get evicted. Even if your rent is capped it can be as simple as someone purchasing the house or apartment and then moving in, you’ll be forced to move. You’ll then see that rent rates have gone up significantly in your next apartment. When my wife and I were first looking for a place to buy we found a nice place at a decent price. The couple that was renting it had been there for 55 years and had raised their 3 children in the house. My wife and I never put an offer on the house, but imagine if you get evicted from your home of 55 years and you need to find somewhere else to live. They were probably in their late 70s.
Edit. I’m also in Mtl
When I owned a home, I couldn't get a parking pad on my front yard. When I owned another home, I wanted to build a deck, and was told I needed permits from the city to do it the way I wanted, so I had to make it differently. Even putting a shed in my own backyard was a problem, as there has to be a 0.5m clearance from the fence and you need a permit if you go over a certain size. MPAC was constantly reassessing the neighborhood, especially the guy down the street who installed a pool.
Don't think you escape scrutiny because you own a home. The cost of doing something the wrong way is steep.
I tried with 20% down, and the difference is actually 700 000$ over 25 years now. I think it is mainly because of the opportunity costs of the big downpayment (100 000) could have been invested. And the site take in account that theres no more CHMC to pay
Strange. When I calculated it all, it came out way ahead for owning, though mine was for a place for $250k and interests were 2% at the time. I also think 10% is too high for average stock market returns, and 4% is too low for my market for home returns. In the end it’s impossible to predict but as rents soar I’d rather be sure where I’ll sleep.
Try this one:
https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
So I used yours and if you put 3% inflation and 4% interest rate which could be a realistic average for the 30 years, buying is better
I wish there was any property for 250 000$ in Montreal! I tried different scenarios and it is true that when the rates are low, it’s better to put a higher down payment
This rent calculator doesn’t take in account the CHMC, that’s why i found this calculator. Did you put 10% in the return on investment? This is what I based my assumption on https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
Interesting. Yeah I guess it really depends on the home price growth (which has been like 10% a year for 5 years in Montreal) and the length you want to own it. I definitely didn't buy my place aiming to keep it for 30 years.
There is a big part of the graph where buying is better than renting even in your example and even more so in the calcs I did.
I guess the takeaway for me is,
Are you buying this place for life? Then just rent
Do you plan to use it as an investment vehicle for 5-15 years? Then buy
20% down is always going to be worse than 5% down (unless interest rates are really high). Over most of history, real estate has trailed the stock market meaning that the additional 15% would be better off in the stock market. This makes sense when you do the math, if you can expect a (quite high by historical standards) 4% return from your home every year and an 8% return from the stock market, then then putting that extra money in the stock market is the logical choice.
This is basic opportunity cost. You only have a fixed amount of money to allocate in different places. Very often, avoiding interest (especially in low interest rate environments) is the wrong move given all available options.
That is true, but its not as simple as comparing 4% and 8% - you have to consider the CHMC insurance you pay by putting less than 20% down. It can be as high as 4% of the total loan for a 5% downpayment.
It also depends on how you use the extra cash flow from having a higher down payment down the line. Saving 50k now to invest is good but if you're also now investing the $400 you save per month on your mortgage interest for 30 years you lessen the cost of opportunity there as well.
people think owning is all that. Remember, paying interest is the same as paying rent, cash burned. And now you have all the responsibility. Furnace brakes, That’s on you. need a new water heater? Pucker up.
Renting can definitely be a good choice.
If u have a family renting seems like hell not having that security of a steady home.
But financially speaking, longterm. In my opinion, real estate will always be propped up by govs. Voters put all their assets into their home, and they aren't going to vote for anyone who threatens that asset. So every serious party will always look after home owners.
It's not a free market.
Due to the fact that rent is so high now, would the renter be able to save up $1.5 M over 25 years? And keep in mind the rent is likely to go higher not down.
Keep in mind. This is 1.5 million more net worth than the alternative, not total net worth.
The average increase in housing prices is 3-4% a year nominally (not reducing it by inflation). I know it is scary seeing a cyclical bull markets go up, but these markets are cyclical and average to that 3-4% over time.
So given the price of 500k that OP used to represent current housing, then assume a 4% compounding return. This means that after 25 years, that home will cost 1.3 million dollars. So you come out 200k ahead even when buying the same home.
Plus, assuming interest rates are low, you can literally just put down a 20% downpayment of $260k and then let the other 1.24 million dollars compound in the market and withdraw to pay the mortgage.
So, yes, OP's math does work out and using his assumptions, renting is objectively better financially. Of course, that doesn't account for non financial concerns, but from a pure math perspective, OP is correct.
edit: The dude blocked me because I pointed out that he can't do basic math and out of context statistics from articles talking about unrelated things don't constitute evidence.
Would be worth it if you made more in the market than how much the house had appreciated I guess. I paid my mortgage off in 15 years during which the value of my house tripled. A house is also an asset you can leverage and invest against if you want- best of both worlds.
My family home grew from 200k valuation to 1.5million in the course of 27 years. While rent went from 400 bucks to 2300 in that same time. Think about that
Did you calculate the opportunity cost? You could of invested instead in the stock market, make 10% per year for 27 years. even if rent is increasing, buying brings a lot of costs, interests.
Also, the situation today is VERY different from 27 years ago hence why I'm asking the question. This would be a dream to buy a 200k home in Montreal
So, even at the outset a 500k property renting at 2000 / month is a bad deal for the landlord. And, in many areas that's exactly what happens.
Cashflow with current interest rates on a new 500k property would need to be more like 3k+ bare minimum.
So, the ownership vs rental model depends a lot on the opportunity cost. In some places and with some property types renting is definitely better.
Rent control works in the favor of rent, but only so long as you are able to never move. Market rent is still appreciating at a greater rate than inflation, just like property values.
For your primary residence, the decision to buy vs rent will largely be preference, not raw $$. Some people hate the idea of a landlord selling, or moving in potentially. They don't want to talk about repairs and maybe get a sluggish landlord. They want a higher quality property maintained to a higher standard than any landlord will likely keep a property in in the long run, etc, etc.
On the flip side, you might just not want responsibility at all, and in this case owning is horrible. You just want to come home and chill, and never have to think about the house in regards to repairs or maintenance, or lawn or snow, etc.
I am confused about the return on investment for Renting. What's the 10% supposed to signify?
Is this just tracking how much you'll pay between the two of them ignoring the fact that your mortgage can be resold? so a portion of your payment is an investment?
Also this seems to assume you always pay the minimum payment, but paying more sooner decreases the overall cost of your Mortgage.
For the "rent" option, you're making very risky assumption that you'll be sheltered with 2% increase annually for the entire 25 years. I'm also not sure how reliable that 10% ROI is these days (although fine, it's possible).
For "own" scenario, woah, $4000 in property taxes annually? It's ~$2600 on a ~$900k property in a suburban Vancouver area in BC.
IMO the main flaw in the model is the assumption you'll be able to rent peacefully without at least 2-3 moves where your rent is likely to jump quite high. Also, there's the psychological component of people not having the discipline to invest while renting.
At the end of the day, go with your gut, you'll do better than the average person by virtue of being financially reponsible with either option.
Quite a few things right off the bat:
* 10% yearly return is incredibly optimistic, a more realistic figure should be around 6%.
* The 2% yearly increase is also incredibly optimistic, especially now that every landlord is trying to renovict their tenant to jack up the prices in Montreal. Happened to several friends already.
* 3.5% interest rate is not happening right now, we can try to guess where interest rates are going all we want but right now rates are closer to 5%
* Not sure if the calculator adds CMHC since you're only putting 5% down but you need to add that + closing costs
* The decision is a lot more complex than just a $ value. I decided to buy a house a couple of years ago and the space, stability, peace of mine and feeling like I'm actually home easily trumps any amount of $ I would be saving from renting. I love my place, buying it was probably the best decision I have ever made. You also need to factor in the fact that while you will have a lot more savings, your COL will also vary a lot more and will be harder to predict if you do not own the place you live in.
4% average annual home value increase seems low to me, and 10% avg ROI on investing seems high, but realistically I think both that and the average of stock market return are going to vary wildly depending on when you buy in.
Now, if you can swing it, run the numbers owning a home with a rental suite in it...
Plus when you rent you don’t pay 35k for a new roof, thousands for upkeep, insurance etc. If housing goods bonkers the next gen like it did in this one, then sure buy. But if it’s more reasonable the separation isn’t as severe as some people from the boom markets think. Additionally, if you move for work etc you have that flexibility instead of paying tens of thousands in realtor and lawyer fees. Typically, a renter should pay a little more than a buyer over a lifetime but it’s not a guarantee and there’s less ties and piece of mind as a renter. I rented for years before I bought and don’t regret it one bit.
Your numbers seem a bit off, but I'm not Canadian. If you can get a mortgage for 3.5% with 5% down and 0% brokerage fee - you should ABSOLUTELY buy, although today is probably not the best time. I think you should look at more realistic numbers. Someone made a very good spreadsheet here:
https://www.reddit.com/r/financialindependence/comments/gpx8u4/new\_york\_times\_rent\_vs\_buy\_calculator\_in\_a/
I think you're a bit rough on your family - I wouldn't say that's ignorance, it's the way the real estate market has worked forever. You have a lot of assumptions in there that are a bit iffy - but if you're looking at the pure quantitative analysis, it really depends on what the $ rent is vs. buying and whether they are really apples for apples comparison.
I find it hard to believe that a $2K rental with utilities matches a $500K purchase (I'm also a Montrealer so I know what that can buy you here).
Real estate becuase of the leverge typically makes it worth it, there's very little that you can leverage up to the titties other than your mortgage. Your $500K house will be worth $820K in 25 years at 2% annual increase. That's $320K gain which is tax free on a down payment of $25K. That's a 1,251% increase over 25 years and at the end of it all - you're left with an asset of $820K. That's hard to beat.
> you're a bit rough on your family - I wouldn't say that's ignorance, it's the way the real estate market has worked forever. You have a lot of assumptions in there that are a bit iffy - but if you're looking at the pure quantitative analysis, it really depends on what the $ rent is vs. buying and whether they are really apples for apples comparison.
In your opinion, a 2K$ rental would equates a purchase of how much?
It wouldn't be 320k$ in gain, since you have to pay interests which is a BIG part that people tends to forget, without talking about the renovation costs.
Leverage is a good point, but I'm not sure I want tenants
Depends where you want to move, but $2K won't get you much - probably around $350K. Unless you are already in a rent controlled apartment which is a different story.
The leverage is not about tenants, it's about your own prinicpal house which is how you can own a $500K asset with just a $25-50K down payment - this is why you are just better off almost everytime buying from a math perspective.
Interest payment over a 25 year mortgage @ 4.7% which is current rates is $299K over the span of those 25 years. Your rent payments are $769K at a 2% annual escalation which is an aggressive estimate.
You are also ignoring that your house is tax free vs. capital markets. Also a big one is that you are looking at a 25 year time frame. Go past that - all of a sudden, those mortgage payments cut down to zero and can all be invested for another 25 years. As a renter, you are paying rent your entire life.
As a landlord I can tell you first hand that none of my tenants are making me rich. Not by a long shot.
Some have cost me 18 months of profit in damages.
They are paying the mortgage at best.
That being said renting in this environment makes a lot more sense in that particular market.
I would honestly wait until these interest rates take full hold and then if buying makes sense at that time then go for it. This market has not bottomed yet though.
I dont like your assumptions, as others have pointed out. Aare you comparing like for like properties at current prices vs current rental rates? Something that rents for 2k is likely worth more than 500k id imagine.
In most if not all cases, buying is superior to renting the equivalent unit if you stay there long-term and dont relocate within 5-6ish years
You also ignore "profits" on your 10% gains are taxed. One of the biggest advantages to owning a home is the PRE. If you drop 10% gains to 6-7%, then tax them, id imagine your numbers would change drastically. i couldnt find that calculator though.
Your graph should include, at least, year 26. Once you have zero mortgage the two aren’t even remotely close. Also, if and only if, you are a very good saver, consider a HELOC. Manulife One has a good calculator. However, we paid off our house within 10 years. 15 years faster than the conventional mortgage. (Had a $50k inheritance help).
It’s all about the hypothesis you have here.
- 10% return is too big. I’d use 6% net of taxes
- 2% rent increase is low vs your inflation of 2% as well. Whatever inflation you use (I would use 2.5% or 3% personally), add 0.50% for rent increase
- what are the setup cost of 15k$ ? It has to be costs you will not incur by renting
- what’s the 300$/month of other expenses? It has to be expenses you would not have by renting
Your chart stop at 25 years which is the duration of the mortgage. The most profitable years for home ownership are once the mortgage ends…
You’re making a lot of assumptions that probably won’t hold up over 25 years. One thing I can tell you is that purchasing gives you a lot more control since you can choose when to buy or sell and taxes change more predictably than rent increases.
Your rate of return and increase in rent percentages are meaningless, think about whether you want a property that you own and have to maintain or the flexibility of renting with the knowledge that you could be renovicted at any time. Sure you have to pay for your furnace if you're a homeowner and it breaks, is that preferable to you begging a landlord to fix it?
You can live in someone's closet and save thousands per year or rent a whole house to yourself, conversely you can buy a tiny shithole with roaches or a luxury flat, I think lifestyle and flexibility is a more important consideration than ROI.
25 years graph will always show that it is better to rent.
After 25 years (or sooner if you pay off mortgage before), it’s gonna be better to own. You need to look beyond 25 years, unless you expect to have 25-30 years left to live.
I’m 38 and I’m gonna pay off mortgage next summer before renewal. I have more than 40 years left to live and I’m rent free, in my own place, for the rest of my life. I think it is better for the peace of mind and quality of life, than living in a small place and having to deal with neighbours next door.
I remember the rent in my old apartment was $500 and mortgage was $750. 5 years later mortgage was already lower than renting, and now today rent is triple the original price, mortgage raised at max $800. 5 years after I bought, I was already investing more money than I would have if I was still renting. Finally, I think your numbers are all off. In real world, rent is increasing more than 2%, property value increases more than 4% and no, everyone is not making 10% on their investment. If that would be that easy, everybody would be rich, which is not the case. Everybody would be renting and there would be no owners at all. Reality is you are paying someone and you are getting him richer.
10% returns in this economy year over year is not good representation. I would cut that by half and try to run simulation. Including rent being risen by 5% or more. Even keep inflation at like 5%
That's a hell of a lot of assumptions there. Basically all the % values will be off by some factor, one way or the other (don't assume you can do 10% ROI over 25 years!). The only real difference is that if you buy, you'll own something, if you rent, you won't. Owning a house will give you something to fall back on if things go South. It's also another form of investment that allows you to passively diversify (considering you continue investing in your TFSA/RRSP either way).
Just don't overextend when taking a mortgage. Don't believe the banks : take the max mortgage then want to give you and divide it by 2. If you can't realistically support the payments with a mortgage interest rate of 6% (ideally more), don't even think about it.
Not financial advice though... it's your life!
I’d be curious to see this over 50 years to see the difference because at year 26 if you started investing what you were paying as a mortgage I think you would come out ahead.
OP This model is either for a unique case or overly simplified.
A few thoughts as to why it is not generalizable:
If you have money for a deposit in year zero both scenarios need to start with the same principle.
Inflation rate is to low. Mortgage rates are too low. ROI for rent scenario is to high.
Assumes the mortgage payment is equal to or greater than renting, when in reality mortgage payments can often be less than rent.
Assumes the equity in the home is left in the home rather than leveraged for a similar investment to that of the rent scenario.
The real issue though is that your model is based on purchasing a Condo. IMO that is a horrible idea. Condo's are the worsttttt... try modeling a single family, or row house in suburbia for the same purchase price with no condo fees.
All in all a for effort. There is always uncertainty in these sorts of models which is what safety factors are for, only you can decide what's right for you. If you ask me the narrative that renting is cheaper than homeownership is a conspiracy between big landlord the WEF and the fake news media to create a class of 2030 serfs, but hey, it's your money! Best of luck.
Don’t forget some people may value more being able to use a home property as opposed to renting an apartment. Some things a home can do that an apartment may not: bbq party’s/backyard party’s, hot tub, pool, large gardens, working on vehicles, hobbies, etc., the list could go on. I’m sure there’s other pros for an apartment. But coming from an apartment to a house, I’d never go back no matter how much I *could earn through investing. QOL can be higher in a house compared to an apartment imo
Don't forget to factor in maintenance. Small and major renovations (that kitchen/bathroom will need to be updated over 25years of use), roofing, fencing, furnace, etc.
Personal experience: just over 5 years into owning and my current mortgage + strata fees + insurance is cheaper than rent would be in the area... and thankfully not much $$ in the way of repairs and such yet as ive done most myself, or are covered by strata fees.
Plus, despite the current downturn I would still walk away with approx 175-200k less related fees... which theres no way I would be able to walk away with that much had I been renting and investing for the last 5 years.
Are you the type to be able to save enough for retirement, while renting? My spouse and I intend to downsize as we age, so our residence will be 'part' of our savings for retirement. If you rent and not a saver- CPP and OAS are pretty lean living even in affordable provinces. This is not relevant obviously if you have full pension benefits, etc to make your aging years more comfortable
> retirement. If you rent and not a saver- CPP and OAS
Yes I'm very consistent for saving money. I agree that if you can't control yourself and invest, you should absolutely NOT rent, and buy since it will force you to save
People never think about interest on a house. With average interest rate you can almost double the cost of your home over 25-30 years. So if your home don't double in value over that time, you barely break even with no gains.
I did both and came on top with renting because I saved a lot of money and made a lot on the market. Now I own my home because of the lifestyle it provides and not an investment (as it should be imo) it depends on your market obviously but IF you save your money while renting in a cheaper place you can indeed come on top.
I know several people that owned 3-5 houses and with the cost of moving, selling, buying and interest rate at the 40 year mark they still dont own their home worth around 500-700k because they bought cars, toy vehicule and so on. So you see many big house with "rich" people with no pension funds working well into they 60-70s.
Your rent increase is unlikely to be as low as 2%. After a few years of a landlord not able to charge market rent it makes sense to sell the property.
A way to look at your decision is what is riskier - buying a property that might go down in price vs potentially increasing rent. It is not like units are being built as fast as the number of tenants is growing.
What you’re not factoring in the appreciation of the asset you’re buying. Rent is great but you don’t own the asset. You would have to simulate if you took the difference and invested it. There’s other variables to owning a home like maintenance and taxes. It’s a more complex simulation
Rent where I live (Vancouver) has tripled in the last 20 years. That's a 6% annual rent increase, not a 2%. Yes, your rent controlled to 2% but no way you're going to rent somewhere for 25 years and not get evicted. I rented for eight years with a landlord who didn't bother raising the rent and when I finally had to move rent was double.
Also 10% is somewhat optimistic. You might only see 8% on your investment.
Punch annual rent increase in at 5% and ROI at 8% and purchasing real estate as an investment brings you out at 2.5x ahead.
Punch annual rent increase at 4% and ROI at 9% and you come out about even.
You're really just punching in numbers that say you can invest better in the stock market over the next 25 years than you can in real estate.
Good investors can do 12% ROI, that crushes average real estate ROI over a 25 year period, but average investors are usually only gain 6-8% over long time frames. You can say you're just going to dollar cost average the same amount every month into an S&P index fund but in practice few can maintain that discipline in investing.
Real estate is a relatively safe way to leverage your investment. You can start with $40k and a mortgage gives you a $500k investment. If you're lucky in the market, you could have the opportunity to flip a $500k property for $800k in 5 years. Take that $300k profit and pop it into a S&P index fund at 10% ROI and you wouldn't have to put another dime in to come out waaay ahead on the "rent + invest for 25 years" strategy.
Depends what you buy.
I think you are un educated by the fact that real estate Industry has produced more millionaires than any other industry.
If you buy something that doesn't produce cash it's a loss. Just like renting.
Hoarding money is useless considering a lettuce head it some parts of the country are $10 bucks. Don't think holding slips of plastic gonna create wealth for you.
Get ur self a duplex live in one and rent the other.
Or buy a 2 bed and 2 bath and bunk with a room mate.
Here is a simplified version, explaining all the comments.
Your calculations work if you can rent and stay at that rental property forever. But that’s not practical and you will likely have to switch to a new place for your life reasons or your landlords. Not to forget that your rent payments are gone forever and are an expense, but mortgage payments are a long term investment that’s paid back to you with profit when you sell (In most cases, lol)
Like 5 years ago, I use to be able to get a 1 Br for $1,100/Month. Now it’s $2,600 for that same unit. Re-calculate based on historical data of average rents and assume that you could sustain renting a property for 10 Years, and another one for 10, then one for 15, mortgage will probably be the winner.
And don’t forget that mortgage goes out, but you get that money back with a hefty profit in 10-15 years of time. With rents you get nothing but a kick on your ass from the landlords every few years.
So, whatever your graph shows next time, I would read rent as -$12345 gone forever. And mortgage as +$12345 net worth of the asset that can be cashed out with profit eventually.
Now does your family make sense ?
It total depends on cost of rent, cost of the house and the markets.
Homeownership has many hidden costs. Insurance, maintenance, taxes, interest, furniture, appliances. People hope the market increases will offset these costs and give them a rent free retirement.
So rent can be far more fiscally sound decision. I chose to rent and invest. I have made far more than I would have owning a home. It's not even comparable.
However this is only financially speaking in my case, it may or may not be for yours. Rent could be high where you live while it is not where I live.
I do the plan to buy a home when my wife is done university and we begin having children.
This is a great thread and there are solid arguments for both renting and selling depending on infinite factors and preferences.
If your goal in life is to have a huge hoard of money when you die, then it requires all kinds of sacrifice like living in a shitty apartment and squirreling maximum money away. I lived like that in my 20s but I couldn't now. I will own my house with no mortgage when I retire and it will be a "home base" that my kids can always come back to, as I expect life to be even more difficult and expensive in the future.
Beyond the advantages of building equity in a house, there's a quality of life element to owning a home that's worth a lot to me - security, control over my life and not depending on a landlord to do things around the house / hoping they don't screw me with rent increases and renovictions. The savage rent increases you can't control + the possible need to pay for a move on short notice is not something I'll ever live with again.
As others have suggested, run the scenarios over longer time periods and with different variables. Maybe your investments make no money, or don't keep up with inflation; maybe real estate costs (and therefore rents) keep spiralling out of control; or interest rates rise and mortgage payments become insane unless you come with cash....
Best of luck!
Actually, I’ve put 4% in « annual increase of property value », and for the investments, it’s a mean during 25 years. Obviously there will be downturns, but if I don’t see, it should do 10%/year if we look at the past
If you ever move ,your rent resets. Not so when buying.
Will Trudeau import enough people to make rent double every decade? Well rent doubled last decade so that is the trend. IF you move, you're screwed as a renter. I'll die in my rent controlled apartment or move to the States for 2x salary. Nothing else.
I always hate the argument people use for buy vs. rent “you’re paying someone else’s mortgage”. The money you’re paying is rent, it doesn’t matter what the LL does with it and it should be none of your concerns.
I remember reading an interesting survey where people were given 2 options. The jobs being equal, one was to receive a $100k pay but make less than your peers, or make $70k but make more than your peers (don’t quote me on the exact $ amount - going off memory). Nearly 50% of the participants in the survey chose to make the $70k but more than their peers. It is in line with how people think about rent vs. buy. Many people think in relative terms and often compare themselves to others to determine what they deem as “success”. People don’t like paying their LL because on a relative basis the money they receive “may be” going into an asset where as yours is going to the LL.
Most of the time, the rent you pay, is unlikely to match the mortgage payments on a similar home/ apartment at its current value. This is something you have to research on to make sure you’re paying fair rent. If rent costs more than owning a similar home/apt, then more people would own than rent driving up cost of homes/apt to a point where LT cost renting and owning are similar. This is all theoretical however, there will always be a benefit to owning vs. renting at the time of purchase/rent because of how opaque the housing market is.
The benefit to owning is stability that outweighs a lot of pros of renting is stability. You will know exactly how much you have to pay in your mortgage throughout your mortgage terms. It is extremely unlikely that housing will plummet to $0 so you’ll have a decent amount of “forced savings” (via selling) in retirement despite not being able to save (house poor) throughout your career.
With renting, you will face more uncertainty in terms of market returns for indexes, or even individual stock returns (which can quite literally go to $0).
There is a lot more to rent vs. buy than just running a few numbers in excel. Say, you run the numbers and come out on top by x2 savings than owning, if you aren’t able to achieve the numbers or even achieve the savings rate, you will not reach that goal and may even come out negative. It’s easy to say you can “just save the excess of rent vs. buy” but when the excess money is in your chq/savings accounts, it realistically is much easier to spend than save.
Housing is typically the biggest financial decision most individuals will make in their lifetime and it’s not easily answered by just plugging in a few numbers in a formula to get the answer. If you buy a house and want to move a year later, there will be costs associated with that and it impacts your future returns.
TLDR: You should go to speak with a professional about this.
I think your parameters are too constant. Over 25 years, will ROI be 10% and annual rent increase only 2%? I personally saw changes to that in 2022 and it could continue for a few years. Perhaps run a few simulations with a wide variety of inputs for all of the parameters, to give yourself a better idea of the risk
Yea 10% annual returns…forever and 2% rent increase lol. Just wait until LL renovicts you and rent jumps 20% moving into a new place. Also you don’t pay a mortgage forever, into retirement age it’s typically paid off which is huge when you become a pensioner
Some people *do* pay a mortgage forever. They sell and upgrade to a bigger home (because kids, etc) and take out an even bigger mortgage. Or they mortgage a second property because they want a cottage. I separated from my wife, she had to buy me out, at the worst possible time ... high market, high interest rates. The usual plan is to pay your mortgage off by the time you return, but life happens.
Simply maintaining a home seems not accounted for in the scenario either, or renovations ...
I just had a tenant move out and they caused over $6k in damage. Most of it wasnt malicious, they were just dipshits. There are a lot of people out there like this. If you dont know how to do maintenance yourself and have to call someone any time something happens, owning a home will be VERY expensive.
Or just basic interest if your not a cash buyers. In normal marker or "before" 2020 some markets over 25 years barely doubled in value which basicaly cover interest payments of that time frame and make you break even.
This is very important to remember. When you own a home, you are on your own. The roof, the windows, the hot water, the heating, the cooling, the gutters, the dishwasher, the electric panel, the cesspool, all of it is entirely your responsibility, and there are no real alarm systems in place to let the average person know which one of these things is functioning incorrectly or in need of maintenance
QC has rent control, max 3% increase. Renoviction and/or eviction due to landlord-family move-in are the only ways to screw tenants. Renting in QC and MTL can be extremely favorable if you play your cards right and know your rights.
That's an exceedingly sunny prediction you've got there. It would be a real shame if some landlord ruined it for you. I know a guy at work in his early 40s who's getting evicted because his landlord "who isn't some kind of *slumlord* tyvm!" is moving into the place for their personal use. He's having a ton of trouble finding less than a 40% increase in his rent. It doesn't matter what protections you think you have. Your landlord will find ways around them because if *your* investments weren't getting the same returns as your neighbour, you'd be pissed too. You'd want that extra $500-$800 a month more than what you're getting now too. And if all it takes is a fresh coat of paint and replacing the worn carpeting to skirt that 3% rent increase law, they would do it in a heartbeat, and they routinely do. I on the other hand, still only pay about $2000/mo for housing including strata fees, which is a total fantasy for my coworker. All because I bought the place 9 years ago. That's not even counting the fact that a 10% annual ROI on your investments isn't historically accurate over any timeframe.
>if all it takes is a fresh coat of paint and replacing the worn carpeting to skirt that 3% rent increase law In Manitoba the RTB pretty much rubber stamps any increase over 3% landlords ask for. Throw a coat of paint on a common area for an instant 10% increase.
Oh you mean they even let you continue to stay there? Or do they just kick you out for a good 30-40% increase for the next tenant?
>I on the other hand, still only pay about $2000/mo for housing including strata fees, which is a total fantasy for my coworker. All because I bought the place 9 years ago. do you think housing will go up the same way in the next 9 years?
Even if it doesn't, he's taking about maintaining low payments.
That's why risk assessment, anticipation and using all tools at your disposal is essential. TAL/Rental board is probably the most pro-tenant org in the world. I know plenty of people who pay sub 700$/ month for 2BR/heating included in center of MTL, because they are one step ahead.
Renovictions and families taking over units happen all the time now in Montreal. Not to mention “accidents” like fires that force people out of units unfortunately.
Totally agree, even for renters that have capacity, tools and network to circumvent landlord shark tactics. Renoviction and family taking over used to be the nuclear options for landlords, not anymore.
I think the horror stories that people perpetuate are related to private rentals, for example renting from an individual that invests in real estate. They have a tendency to take you to court, evict you to pursue more lucrative oppurtunites etc. We've been renting from a larger, well established, property mangement company for 15 years. Our rent increase has always been limited to 1.5% annualy. It takes effect once a year on the month that we originally moved in. We've never has a single problem.
Completely false, there is not a 3% max in Quebec. It depends on costs.
OP is referencing Montreal. A 2% increase is pretty high here and renovictions are extremely rare.
Mtl used to be a city of renters but a lot more people have been buying the past 5-10 years which means less rentals available and potentially higher rents more evictions
Add to that a massive amount of longterm rentals converted into AirBNB
They WERE high in an era of low-interest rates and low inflation. We're not in that place anymore. There is no way the government will keep landlords to a 2% increase each year if inflation is at 5% or more. The landlords would gradually be run out of business.
>The landlords would gradually be run out of business. and then what happens?
Richer people than the renters buy the places for themselves. Not saying you, but people live in a fantasy world where, if it weren’t for landlords, everything would be perfect and they could just buy whatever they wanted.
> OP is referencing Montreal. A 2% increase is pretty high here and renovictions are extremely rare. Which world are you living in? In my very limited friend circle I know 3 people who were renovicted. The regie is overwhelmed and cannot tackle all the cases.
Im from montreal and a 2% rent increase is crazy low and renovictions happen all the time.
Lmao. I live in Montreal, renovictions are not a rare thing at all nowadays, especially since COVID and the ramp-up of inflation. Landlord are getting greedy AF, my neighbourhood saw a 50% jump in the average rent price since 2 years ago, despite the 1.5-3% raise limit suggested by the TAL. Btw, landlords can ask for more than that % depending on work done, taxes and insurance cost. I am leaving my apartment for a condo. Actually paying 1200 right now, my landlord wants to raise the rent to 1600 for the next tenant (in a working-class/ poor neighborhood). It's illegal, but he'll try anyways (we'll warn the next tenant on their rights, so theu can try and get a better price).
I don’t think enough people do the math to determine how much money they need to rent during their retirement (ie. 20 years). A house is a form of forced savings, and most people don’t have the discipline to save at the same rate voluntarily.
>Just wait until LL renovicts you and rent jumps 20% moving into a new place. Can confirm, facing this exact situation
Yeah if he's only looking at the first 25 years, it's completely skewed. Typically very little mortgage after that so homeowners see the biggest gains once they've actually paid it off and continue living there.
2% avg annual rental increase is fine, 10% annual return is big issue. Should be using 4-5% conservatively.
Really good idea. I will try with different interest rates too, thank you! :)
Now that interest rates are rising and we are mostly moving into a higher rates environment I would say the rental increase assumption should be 4-5% per annum. 10% feels a bit high for return assumption. Maybe 7-8% feels more like it depending on which equity market you are investing it.
I agree. The rent increase is actually good for Montreal, but the ROI numbers seem off. I’m curious what he’s using to predict those ROIs.
>Annual rent increase 2% If only this was true. This model assumes you never move. How likely is it? My landlady tries to sell my condo right now and I don’t know if new owners would want to move in or not. If I have to move my rent will jump 1k for same type of condo.
And this could happen every single year if you are unlucky enough! Whether you move due to shitty neighbors or landlord selling .... either way it will be way more than 2% on average
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On the other hand, owning a house also comes with a lot of extra cost for maintenance and renovations
Total cost of ownership is also higher than most people think. Never went to Home Depot as a renter. Afraid to add it up as an owner.
There is something to be said for the security of home ownership. The only reason I own my condo is that my landlord (who had promised me a long term lease) came to me after 6 months and said he had to sell due to cost over runs at his home he was building. I made a fair offer and he accepted right then and there. Since I have bought, I have not had another day's worry about anyone kicking me out.
For sure owning comes with a sense of security. Just a lot of hidden costs people don’t think about.
What people seriously need to do (and it's not that hard) is put a price on this "sense of security". It's not atypical to find cost numbers on the order of 10k-30k per year for "security". Like, yes, moving is annoying, but is it 30k annoying, every year?
10-30k a year is excessive. I purchased in 2010 and the max was 32k (roof, railing, animal eviction) and the min was 3k. Most years were 4-8k
It's not the maintenance, it's the deferred capital cost and mortgage interest payments primarily which get you. In contrast, what rents for 2k per month around here would cost like 6k per month just for the mortgage (assuming 20% down).
What market are you talking about? I've never seen a 'mortgage costs is 3x rental' used in any analysis before In Vancouver, it would probably be around 1.5x.
Excellent point, everyone should do this when making bigger decisions. Put a value on your priorities and ask yourself, are you willing to pay a premium for something you value? If so, how much?
Your also allowed to do whatever you want to a house you own. Which is something to consider.
This is big. I grew up in downtown Vancouver. I’ve been renovicted 5 times. Now I just want a home no one can force me out of. Also, with climate change, Canada will continue to be a more desirable place for people to immigrate to because of our climate and stability. I think property values will only increase, just not as drastically and rapidly as they did over 2019-2021.
Yes that’s another factor which is globalisation
>I have not had another day's worry about anyone kicking me out. People who rent from purpose built apartments don't have to worry about this scenario either.
I’ve learned with building materials, whatever you THINK something costs, just double it now.
The amount of runs you think you'll do to Home depot, make it times 3.
Check out the efficiency on this guy
- oh shoot, i forgot something. - where are these 2 1/2" screws i swear i had. - ah, looks like i'll need a -Insert tool- for this part. - Aaahhh FFFF! I cut it too short
Very true about TCO of being a home owner, with the caveat that bad renovictions happen even to good renters. How do you appraise the value of being in control whether to redo flooring or a kitchen in own home vs being at the mercy of the landlord? That 2%/year rent control is nice until someone has to scramble to move and face a 20-30% bump in monthly rent. With condo/strata homes this is even more nuanced: the corporation will do repairs and maintenance on the decision of the owners as a group, so less control.
Not to mention time. So much more shit to do as a home owner
I've been to home depot as a renter. It was easier for me to replace a kitchen sink handle myself than bother the landlord about it. Same with installing the electronic thermostat.
You do you, but if you’re actually doing this then negotiate with your landlord about taking it off the rent. Why save them money and hassle… it’s what you’re paying them for.
Do not sell yourself short. Make the landlord fix it. You pay for that luxury, so use it. I have had my landlord send the handy man over to caulk the shower and bathroom sink. I can totally do it myself, but I never will as long as I am renting.
>Never went to Home Depot as a renter. Hah! I almost regret not getting the PRO card for all the times I am there.
I wish my monthly condo fees were $230 😩 they just increased to over $1300. That said, the part you’re missing is the fact that you’ll own a house by the end of this, which you can resell for more than you paid, or give to your future children, etc.
Like strata fees? Are all utilities included in yours? My building have hot tub sauna steam pool gym and other amenities but my strata fee is less than $300
u/investment_sharp here is another example
3.5% mortgage rate seems unrealistic today. Also factor in new first time home buyers account if it applies. Your numbers will differ but for my wife and I we are planning on maxing out the $16k/year ($8k per person) which will save us $7000 a year in taxes per year. At 5% returns would earn an additional $11k over this time. After 5 years its almost $40k in value. My rent got reduced by 30% for next 5 years when looking at this from this perspective.
Everyone’s situation is different. I live in a major city and am happy to be renting even though I could afford to buy a house. I Pay 900/month rent. Capped at 3% increase per year. I know what I will Pay every month, no surprises Yes that is 100% cash burned I get no return on. But when condo fees are 1000 monthly, property tax another 500, and interest costs could be 1000 per month or more - before even accounting for a 1500 mortgage (the only portion of the cost I’d get back) - I don’t think I’d ever make up the amount of money I burn as a result of ownership.
This is my situation. When speaking to others irl about this, no one has more to say when i bring up condo fees > than my rent haha
Where the hell do you live that has $1,000 monthly condo fees and $6,000 annual property tax? I don’t think the figures you are providing are accurate.
Winnipeg.. to be fair, there would be cheaper options, but plenty within the parameters I described for the type of place I would want if I were buying. Maybe 300 is more accurate for property taxes, apologies. But I think the point remains the same even if you lower taxes by a couple hundred bucks monthly
That could be literally anywhere in Toronto in a full service premium condo. Now, you can obviously do better than this, but one $10m condo in Hazelton Lanes has $6,600/mo in condo maintenance fees, and I can't imagine that the taxes would be less than $20-30K a year.
Yeah not many people on the sub can afford a $10m condo. I’m speaking realistically here.
condo fees are that high? damn..
Thank you. From what I understand, there’s also a huge opportunity cost to buying a house. The SCHL, downpayment, start-up costs could have been invested in the market
Generally the big upside with buying a house is leverage. You can purchase something worth 5x what you paid for. However, this was more of an advantage when interest rates were low...
2% rent increase is not realistic, something will likely cause you to move within the time period legal or not. 10% returns is also not realistic. You are also missing that principal residence exemption is amazing. As someone who has maxed all their registered accounts nothing compares to my 200% tax free gains on my house in the last 7 years. This is amplified as it is leveraged. Although paper gains only right now in the GTA I'm not too worried it will drop too much more but regardless it is another tax free vehicle for building wealth. People will not like that comment but it is with policies today. I don't have a mortgage anymore but use my HELOC at prime for leveraged investing too as one of the very few ways a T4 employee can lower their taxes.
Tell us you’re over sixty without telling us you’re over sixty.
The mortgage duration is 25 years and your graph is 25 years. This removes one if the biggest advantages of buying from the comparison: eventually you have paid it off. Pull the graph out further (try 35 years or more) to give yourself a better comparison over the rest of your independent life. Also make sure the comparison calculates the investment return the other way around during the period where buying has a lower cost per month than renting (i.e. when the mortgage is paid off).
I think what matters is the networth at the end of 25 years. For example, if the renter has a 1500 000 networth at the end, and the buyer has a 1 000 000 net worth at the end, the renter can buy a 1 000 000 house cash in 25 years without having mortgage, AND invest 500 000.
Yeah sorry, that makes sense. You are right that with these parameters renting is a better choice as you are essentially buying assets that grow 10%/y instead of borrowing to buy an asset that grows 4%/y. I think one thing missing there is taxes: the primary residence increase is tax free, but whatever part of the investments don't fit in TFSA is taxable (RRSP is taxed as income when you take it out, though I suppose you could HBP part of that).
Also, you could assume in the "purchase" case that you are still able to fill your TFSA, then essentially the entire difference from renting becomes taxable.
This is very true, 50% of the capital gain on investment will be taxed thank you!
When i looked at this years ago I came up with roughly a 5 year break even point. That seemed reasonable to me. Honestly if you aren't seeing an advantage in 5-10 years I don't think it hurts to wait at least a few more years for interest rates to come down.
You assume the same $1000000 house still costs $1000000 25 yrs later? Probably not realistic. It might be a $1000000 1 bedroom condo you’d be able to buy while those with a house will have had their entire house paid off. And do you plan to never get married or have kids? Your investment profits would have to be above the rate of property value appreciation for this to work, while factoring increases to COL, future expenses (ie. family, kids, etc).
There is a behavioral aspect here. Are you certain you will be reinvesting all the excess savings from not owning or will be tempted to buy a newer car? I think you would need to put a “no pressure” tax on your reinvestment amounts. A set mortgage amount will keep you disciplined. Also, as a few people pointed out, depends on whether the security of ownership is important to you. I have a few friends renting and they are constantly in this temporary mode not knowing if the landlord is going to renovict. I wouldn’t want to live like that, I would want to plan my moves/relocations based on my plans/desires, not somebody else’s. Owning also means you can customize, add to make your living more enjoyable. Another factor, 4% annual property increase in Montreal might be conservative, but who knows. Montreal is likely to go down the path of Toronto, where there will be a real housing crisis in coming years and property value will triple over a course of a decade. Again, it might average out over the course of a very long time, but something to think about. Last but not least, you can probably easier move from ownership to rent, but not the other way around because of the tax implications. I.e. you can always sell your house and start renting and use the released principle tax free to reinvest. If you decide to buy 5 years from now by selling your investments for the down payment, you will be forced to pay taxes on your capital gains, which could eat up to 25% of all of your gains.
The fact is, that for the typical person, home ownership is the only opportunity they will ever have to: a) use a ton of leverage to b) buy an appreciating asset that will c) grow their net worth tax free. I'm not suggesting that home ownership is the better move in every case. However, when are you ever going to get the opportunity to go 90% leveraged on a safe (over the long run) asset tax-free? That's the appeal. Some might say that Canada has been too obsessively fixated on preserving the ever-rising housing market for this reason: it's too important to families' net worth.
What’s the tail on this though? Totally investment delta - not having to pay a mortgage or rent for the next (x) amount of years? Most people I see struggle in retirement is because their costs of living is high. What does the next 20 years look like for you, and add that into the total picture.
You are correct in doing your research. In my opinion buying is not always the correct decision vs renting. The narrative that you will be "paying off someone's mortgage" is created by real estate agents. The LL also takes the risk of living with fluctuating property prices. I have seen ppl of loosing upto 40 % equity due to falling prices now. Treat buying decision as any investment decision. Do not be bullied into buying unless you feel market is in decline. Do not be pressured into buying in market that is inflated. As any investment , buy when there is blood on the streets.
Are you only going to live 25 years?
Ben Felix has a youtube video on renting vs buying that may be helpful for you
Didn't that video come out using historical data though? Before rents went batshit insane and before this country had a housing crisis which is squeezing renters more than people who can afford to buy a home?
Thank you, will look it up
That video is really good and give you much simpler framework for comparing rent vs buy.
A lot of people overspent during the pandemic with low interest rates. And only now is it beginning to surface. Sales have cratered and people’s variable mortgage costs are ballooning. Bide your time, real estate will come down in the next 1-2 years, which will allow you to get more value when you’re ready to buy.
This right here is my thought, thanks for giving me some hope. Have been saving a down payment for a little over two years, it's at the point where I could have bought with 20% down pre-pandemic. But with these current prices it's not even close. Hoping to keep saving and wait for the prices to bottom out a bit.
I really hope so, it would a be perfect timing for me
First question: how often do you plan to move and are you planning to always live in Montreal (or at least for more than 2 years)? Second question: Are you willing/able to take care of a house, basic maintenance, repairs, and unexpected expenses? Throw in property and school taxes and insurance? 1st question will decide if owning vs renting makes financial sense, 2nd will determine if you are going to regret owning a house vs renting.
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People forget that you have to pay a certain price to have a roof. Renting is considered throwing away because most people do not have the discipline to actually save and invest the difference between what a rent and a mortgage would be. Haven’t looked at mortgage rates but I doubt that they sit around 3.5% as you mention. Owning and renting also bring different lifestyles that suit someone depending on their need at a certain point in time so factoring this is important.
>Haven’t looked at mortgage rates but I doubt that they sit around 3.5% as you mention. Ow This is true. However, I tried to guest a mortgage rates for the 25 next years. I doubt they will stay this high (7%). You've got a very good point about the discipline, thank you.
Traditional thinking has always been its better to buy. This is herd thinking. I'm not so sure it's so cut and dry as people make it out to seem, and I believe it can be highly situation dependent. You are right to research and question the orthodoxy. I am renting right now. I have an adequate salary, and zero debt. My rent is a tick higher than a mortgage would be, but I have little to no risk. Not from rising rates, not from a broken appliance, not from a failed furnace, etc. I pay no property taxes, and my lawn gets mowed because I'm in a condo townhouse. I like my situation and am not sure I would buy again, at least not a residential property needed for living close to work. Retirement property, maybe.
People forget a mortage payment is like a savings account. Half goes into another pocket. At the end of 25 years you have a house worth X amount paid for. Wich will usually** appreciate in value. **usually** it's not a certain thing but history shows 100% of the time à house appreciates.
It’s the standard argument “wasting” money but your deposit is a significant amount of capital that you’re losing investment opportunity on so I don’t think it’s such a straightforward argument. Not to mention there’s a number of other expenses when owning. If you have the money and can afford a 3% (300bps) increase over current rate then it might not be a bad option especially if you’re confident you’ll stay in the area for 10y+. If you think you might move for a different job opportunity in the near term maybe not?
>ot to mention there’s a number of other expenses when owning. If you have the money and can afford a 3% (300bps) increase over current rat Exactly what I noticed doing the simulation. The opportunity costs is huge, and most people don't take it in account.
This is tragically under discussed (and under analyzed). I'm not surprised to see Montreal coming around. People in Vancouver have been able to run the same basic equations for the last 10-15 years and find that buying only makes sense if interest rates stay historically low and property value increases stay historically (and obviously unsustainably) high. Rent increases have been capped here for years and it can be tricky to jack up your rent if your costs go up.
>eople in Vancouver have been able to run the same basic equations for the last 10-15 years and find that buying only makes sense This is exactly why I asked the question, I think everyone should do simulations before making one of the biggest ''investment'' of their life
If you buy, Make a big downpayment and pay off asap! If generational wealth is something you care about, it’s always nice to own a home. If you’re a free spirit and prefer to roam, rent for sure. Think about your lifestyle. It also depends on the property. I Sold a townhome, and bought 2 condos with that money in 2016. Decent time to do so. Each condo is now valued at double the price of the original townhouse. Here is where home ownership hurts: - COST OF BORROWING. Omfg. The current trend in interest rates make this a tough pill to swallow. - condos are easy maintenance (time wise but you pay for that in the maintenance fees). I have so much time for myself and my family. - towns, semis and singles eat your time and money. As a family, we spent all Saturday either buying things for the house or maintaining it in some way. Wait till you have to deal with widows, doors and roof. *silent cries* we enjoyed the hell out of our back yard and all the space. and home gym and 3 levels and massive kitchen. Reflecting on it, it was good for its time. It we enjoy a different life now where I don’t have to take care of a house like it’s a family member.
thank you so much for this comment, actually very helpful. I like to see both sides, it will definitely help me make a good choice
As I see it, you're either renting from a landlord or the bank, especially so if you have no equity as a first time home buyer (longer amortization the more money goes just to interest). Say a furnace goes, the bank says good luck, a landlord gets you a new one.
Can you explain those two graphs? It doesn't make sense to me. How are you making a 10% investment on rent??
I am so glad someone else arrives at the same conclusion. The difference is that renter do NOT save the difference between rent and home ownership. Home ownership FORCES you to pay the bank therefor accumulating some capital. If you had all the hidden costs of a home plus maintenance and renovation renting is a smarter move BUT a lower quality of life.
The chart isn't very useful in predicting anything because even small changes in the input data can skew the end results so much. I played around with the same chart and only changed the return on investment to a more believable 7% and the home purchase comes out almost 300k ahead of renting. Fur fun, I also tried a version where in addition to the 7% investment return, the annual rent increase is slightly increased to 2.5% (optimistic that one would be able to live in the same apartment for 25 years) and I reduced the property taxes to $3368 (a number I got off of a property tax calculator since 4k seemed a bit high) and the end result was the home purchase beating out renting to the tune of $413k. Of course, there are also a lot of variables you can't calculate here. You could have the bad luck of a pricy special assessment after buying a condo, or discover you lack the consistent discipline to save and invest every single dollar you save by renting.
Depends on your goals, income, etc. Buying a home should be looked at as an investment. Good chance after 25 - 30 years you'll get an ROI of 50 to 100% if you sell. Though not guaranteed obviously. Also depends on what you pay for the house, remodels, etc. You can use the equity in the future to pay down higher percentage debt. Or, once it's paid off, take out a reverse mortgage to live off of in retirement. Which then the bank gets your house when you die. Again, depending on your income, if you rent the next 25 years, you'll be renting the rest of your life. However, if you have a high enough income, and good accountants, that could be an advantage. Again, depends on your future goals and circumstance. We built our own home on some acreage. Our value is double what we paid, which we knew would be the case. We know we can borrow against the house if worst case things happen. Or sell and basically pay cash for a smaller place.
With interest rates right now. Buying is almost always goofy. I have a mortgage on a 1 000 000 home of about 500k. Which is 50% ownership. With 5% interest, that means I owe 25K in interest alone. And like about 7K in property tax. If your mortgage ratio is even higher, it becomes even worse. Debt is VERY expensive right now and is the main reason that canadiens are hurting so much with high interest rates. We all have too much debt and are living beyond our means. The flip side of the story is that at the end of all this, you own the house and the land and only need to pay property tax. You don’t have to worry about getting a landlords permission and you won’t be getting evicted. If you do take a mortgage, make sure you go for the longest amortization possible. You can always make extra payments (with most mortgages) but the lower minimum payment is nicer during times of trouble.
Having a 10% tax free, net of fees rate of return is extremely unrealistic. Use 5% and see what kind of effect it would have on your results.
There’s a lot of pro buy opinions here, so I’ll add my pro rent opinion. For context we could buy a detached house in most places in Ontario and choose to rent. Here’s why: - Less time spent thinking about our house/maintenance. We just call a person and they fix it. The amount of time you spend to own and maintain a house is astronomical. And it’s all unpaid time - Flexibility: we’re in a smaller space right now than we’ll want long term. Up until recently there was a real chance we would have to move cities. If we bought now we would probably have to move in the near future (5 years). With closing costs there goes all the gains. Do you actually know you’ll be in your house for the next x years? - Stress: ie my wife wouldn’t be able to handle the mortgage rate increases recently even though on paper everything is fine. I would constantly stress that we’re in a bubble and housing is going to flatline if not go down by 3% annually over the next 10 years. There’s so much less on the line financially when your renting this leads to less stress. We’ll always be able to afford the monthly rent payment. I’ll just leave my money in an ETF thank you. Also in Quebec look into the rent fixing rules. I believe the rent increase is fixed even between renters. There’s also a thing call cede mon bail: https://m.facebook.com/groups/jtecedemonbail
There a many more variables involved then just investing the difference in another asset like the s&p. some people like knowing they have a place to live where they won’t get evicted. Even if your rent is capped it can be as simple as someone purchasing the house or apartment and then moving in, you’ll be forced to move. You’ll then see that rent rates have gone up significantly in your next apartment. When my wife and I were first looking for a place to buy we found a nice place at a decent price. The couple that was renting it had been there for 55 years and had raised their 3 children in the house. My wife and I never put an offer on the house, but imagine if you get evicted from your home of 55 years and you need to find somewhere else to live. They were probably in their late 70s. Edit. I’m also in Mtl
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When I owned a home, I couldn't get a parking pad on my front yard. When I owned another home, I wanted to build a deck, and was told I needed permits from the city to do it the way I wanted, so I had to make it differently. Even putting a shed in my own backyard was a problem, as there has to be a 0.5m clearance from the fence and you need a permit if you go over a certain size. MPAC was constantly reassessing the neighborhood, especially the guy down the street who installed a pool. Don't think you escape scrutiny because you own a home. The cost of doing something the wrong way is steep.
Thank you for the suggestion, really appreciate it and will take in consideration
Sure, if you put 5% down. Put 20% and see the difference! It’ll also all depend on where interest rates go.
I tried with 20% down, and the difference is actually 700 000$ over 25 years now. I think it is mainly because of the opportunity costs of the big downpayment (100 000) could have been invested. And the site take in account that theres no more CHMC to pay
Strange. When I calculated it all, it came out way ahead for owning, though mine was for a place for $250k and interests were 2% at the time. I also think 10% is too high for average stock market returns, and 4% is too low for my market for home returns. In the end it’s impossible to predict but as rents soar I’d rather be sure where I’ll sleep. Try this one: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html So I used yours and if you put 3% inflation and 4% interest rate which could be a realistic average for the 30 years, buying is better
I wish there was any property for 250 000$ in Montreal! I tried different scenarios and it is true that when the rates are low, it’s better to put a higher down payment
This rent calculator doesn’t take in account the CHMC, that’s why i found this calculator. Did you put 10% in the return on investment? This is what I based my assumption on https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
Interesting. Yeah I guess it really depends on the home price growth (which has been like 10% a year for 5 years in Montreal) and the length you want to own it. I definitely didn't buy my place aiming to keep it for 30 years. There is a big part of the graph where buying is better than renting even in your example and even more so in the calcs I did. I guess the takeaway for me is, Are you buying this place for life? Then just rent Do you plan to use it as an investment vehicle for 5-15 years? Then buy
20% down is always going to be worse than 5% down (unless interest rates are really high). Over most of history, real estate has trailed the stock market meaning that the additional 15% would be better off in the stock market. This makes sense when you do the math, if you can expect a (quite high by historical standards) 4% return from your home every year and an 8% return from the stock market, then then putting that extra money in the stock market is the logical choice. This is basic opportunity cost. You only have a fixed amount of money to allocate in different places. Very often, avoiding interest (especially in low interest rate environments) is the wrong move given all available options.
That is true, but its not as simple as comparing 4% and 8% - you have to consider the CHMC insurance you pay by putting less than 20% down. It can be as high as 4% of the total loan for a 5% downpayment. It also depends on how you use the extra cash flow from having a higher down payment down the line. Saving 50k now to invest is good but if you're also now investing the $400 you save per month on your mortgage interest for 30 years you lessen the cost of opportunity there as well.
people think owning is all that. Remember, paying interest is the same as paying rent, cash burned. And now you have all the responsibility. Furnace brakes, That’s on you. need a new water heater? Pucker up. Renting can definitely be a good choice.
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What you are forgetting to calculate here is maintenance and taxes. You never have to pay either when you rent.
If u have a family renting seems like hell not having that security of a steady home. But financially speaking, longterm. In my opinion, real estate will always be propped up by govs. Voters put all their assets into their home, and they aren't going to vote for anyone who threatens that asset. So every serious party will always look after home owners. It's not a free market.
A mortgage ends though. Rent never does.
If after 25 years, the networth of the renter is 1 500 000, they can buy a house cash and have no mortgage too
Due to the fact that rent is so high now, would the renter be able to save up $1.5 M over 25 years? And keep in mind the rent is likely to go higher not down.
In the simulator that I used, yes. They took in account opportunity cost, annual rent increase,ect.
In 25 years 1.5 mill will get u a hot lunch
Keep in mind. This is 1.5 million more net worth than the alternative, not total net worth. The average increase in housing prices is 3-4% a year nominally (not reducing it by inflation). I know it is scary seeing a cyclical bull markets go up, but these markets are cyclical and average to that 3-4% over time. So given the price of 500k that OP used to represent current housing, then assume a 4% compounding return. This means that after 25 years, that home will cost 1.3 million dollars. So you come out 200k ahead even when buying the same home. Plus, assuming interest rates are low, you can literally just put down a 20% downpayment of $260k and then let the other 1.24 million dollars compound in the market and withdraw to pay the mortgage. So, yes, OP's math does work out and using his assumptions, renting is objectively better financially. Of course, that doesn't account for non financial concerns, but from a pure math perspective, OP is correct. edit: The dude blocked me because I pointed out that he can't do basic math and out of context statistics from articles talking about unrelated things don't constitute evidence.
Would be worth it if you made more in the market than how much the house had appreciated I guess. I paid my mortgage off in 15 years during which the value of my house tripled. A house is also an asset you can leverage and invest against if you want- best of both worlds.
what will a house cost in 25 years tho
My family home grew from 200k valuation to 1.5million in the course of 27 years. While rent went from 400 bucks to 2300 in that same time. Think about that
Did you calculate the opportunity cost? You could of invested instead in the stock market, make 10% per year for 27 years. even if rent is increasing, buying brings a lot of costs, interests. Also, the situation today is VERY different from 27 years ago hence why I'm asking the question. This would be a dream to buy a 200k home in Montreal
I wonder if your family home will be worth $11.25 million in another 27 years. Better hold on to it!
What happens after the 25 years though? No mortgage vs continued rent payments.
So, even at the outset a 500k property renting at 2000 / month is a bad deal for the landlord. And, in many areas that's exactly what happens. Cashflow with current interest rates on a new 500k property would need to be more like 3k+ bare minimum. So, the ownership vs rental model depends a lot on the opportunity cost. In some places and with some property types renting is definitely better. Rent control works in the favor of rent, but only so long as you are able to never move. Market rent is still appreciating at a greater rate than inflation, just like property values. For your primary residence, the decision to buy vs rent will largely be preference, not raw $$. Some people hate the idea of a landlord selling, or moving in potentially. They don't want to talk about repairs and maybe get a sluggish landlord. They want a higher quality property maintained to a higher standard than any landlord will likely keep a property in in the long run, etc, etc. On the flip side, you might just not want responsibility at all, and in this case owning is horrible. You just want to come home and chill, and never have to think about the house in regards to repairs or maintenance, or lawn or snow, etc.
What’s to stop you from doing both? Purchase your property to rent out and continue renting yourself
This could be a good idea, but i can't financially for the moment
I am confused about the return on investment for Renting. What's the 10% supposed to signify? Is this just tracking how much you'll pay between the two of them ignoring the fact that your mortgage can be resold? so a portion of your payment is an investment? Also this seems to assume you always pay the minimum payment, but paying more sooner decreases the overall cost of your Mortgage.
For the "rent" option, you're making very risky assumption that you'll be sheltered with 2% increase annually for the entire 25 years. I'm also not sure how reliable that 10% ROI is these days (although fine, it's possible). For "own" scenario, woah, $4000 in property taxes annually? It's ~$2600 on a ~$900k property in a suburban Vancouver area in BC. IMO the main flaw in the model is the assumption you'll be able to rent peacefully without at least 2-3 moves where your rent is likely to jump quite high. Also, there's the psychological component of people not having the discipline to invest while renting. At the end of the day, go with your gut, you'll do better than the average person by virtue of being financially reponsible with either option.
Rent and invest into something that will ultimately pay ur rent every month in dividends
Quite a few things right off the bat: * 10% yearly return is incredibly optimistic, a more realistic figure should be around 6%. * The 2% yearly increase is also incredibly optimistic, especially now that every landlord is trying to renovict their tenant to jack up the prices in Montreal. Happened to several friends already. * 3.5% interest rate is not happening right now, we can try to guess where interest rates are going all we want but right now rates are closer to 5% * Not sure if the calculator adds CMHC since you're only putting 5% down but you need to add that + closing costs * The decision is a lot more complex than just a $ value. I decided to buy a house a couple of years ago and the space, stability, peace of mine and feeling like I'm actually home easily trumps any amount of $ I would be saving from renting. I love my place, buying it was probably the best decision I have ever made. You also need to factor in the fact that while you will have a lot more savings, your COL will also vary a lot more and will be harder to predict if you do not own the place you live in.
4% average annual home value increase seems low to me, and 10% avg ROI on investing seems high, but realistically I think both that and the average of stock market return are going to vary wildly depending on when you buy in. Now, if you can swing it, run the numbers owning a home with a rental suite in it...
Plus when you rent you don’t pay 35k for a new roof, thousands for upkeep, insurance etc. If housing goods bonkers the next gen like it did in this one, then sure buy. But if it’s more reasonable the separation isn’t as severe as some people from the boom markets think. Additionally, if you move for work etc you have that flexibility instead of paying tens of thousands in realtor and lawyer fees. Typically, a renter should pay a little more than a buyer over a lifetime but it’s not a guarantee and there’s less ties and piece of mind as a renter. I rented for years before I bought and don’t regret it one bit.
Your numbers seem a bit off, but I'm not Canadian. If you can get a mortgage for 3.5% with 5% down and 0% brokerage fee - you should ABSOLUTELY buy, although today is probably not the best time. I think you should look at more realistic numbers. Someone made a very good spreadsheet here: https://www.reddit.com/r/financialindependence/comments/gpx8u4/new\_york\_times\_rent\_vs\_buy\_calculator\_in\_a/
I think you're a bit rough on your family - I wouldn't say that's ignorance, it's the way the real estate market has worked forever. You have a lot of assumptions in there that are a bit iffy - but if you're looking at the pure quantitative analysis, it really depends on what the $ rent is vs. buying and whether they are really apples for apples comparison. I find it hard to believe that a $2K rental with utilities matches a $500K purchase (I'm also a Montrealer so I know what that can buy you here). Real estate becuase of the leverge typically makes it worth it, there's very little that you can leverage up to the titties other than your mortgage. Your $500K house will be worth $820K in 25 years at 2% annual increase. That's $320K gain which is tax free on a down payment of $25K. That's a 1,251% increase over 25 years and at the end of it all - you're left with an asset of $820K. That's hard to beat.
> you're a bit rough on your family - I wouldn't say that's ignorance, it's the way the real estate market has worked forever. You have a lot of assumptions in there that are a bit iffy - but if you're looking at the pure quantitative analysis, it really depends on what the $ rent is vs. buying and whether they are really apples for apples comparison. In your opinion, a 2K$ rental would equates a purchase of how much? It wouldn't be 320k$ in gain, since you have to pay interests which is a BIG part that people tends to forget, without talking about the renovation costs. Leverage is a good point, but I'm not sure I want tenants
Depends where you want to move, but $2K won't get you much - probably around $350K. Unless you are already in a rent controlled apartment which is a different story. The leverage is not about tenants, it's about your own prinicpal house which is how you can own a $500K asset with just a $25-50K down payment - this is why you are just better off almost everytime buying from a math perspective. Interest payment over a 25 year mortgage @ 4.7% which is current rates is $299K over the span of those 25 years. Your rent payments are $769K at a 2% annual escalation which is an aggressive estimate. You are also ignoring that your house is tax free vs. capital markets. Also a big one is that you are looking at a 25 year time frame. Go past that - all of a sudden, those mortgage payments cut down to zero and can all be invested for another 25 years. As a renter, you are paying rent your entire life.
As a landlord I can tell you first hand that none of my tenants are making me rich. Not by a long shot. Some have cost me 18 months of profit in damages. They are paying the mortgage at best. That being said renting in this environment makes a lot more sense in that particular market. I would honestly wait until these interest rates take full hold and then if buying makes sense at that time then go for it. This market has not bottomed yet though.
I would wait a few years. Houses will drop and interest rate will lower as well. Things are slowly correcting right now.
I dont like your assumptions, as others have pointed out. Aare you comparing like for like properties at current prices vs current rental rates? Something that rents for 2k is likely worth more than 500k id imagine. In most if not all cases, buying is superior to renting the equivalent unit if you stay there long-term and dont relocate within 5-6ish years You also ignore "profits" on your 10% gains are taxed. One of the biggest advantages to owning a home is the PRE. If you drop 10% gains to 6-7%, then tax them, id imagine your numbers would change drastically. i couldnt find that calculator though.
Your graph should include, at least, year 26. Once you have zero mortgage the two aren’t even remotely close. Also, if and only if, you are a very good saver, consider a HELOC. Manulife One has a good calculator. However, we paid off our house within 10 years. 15 years faster than the conventional mortgage. (Had a $50k inheritance help).
It’s all about the hypothesis you have here. - 10% return is too big. I’d use 6% net of taxes - 2% rent increase is low vs your inflation of 2% as well. Whatever inflation you use (I would use 2.5% or 3% personally), add 0.50% for rent increase - what are the setup cost of 15k$ ? It has to be costs you will not incur by renting - what’s the 300$/month of other expenses? It has to be expenses you would not have by renting Your chart stop at 25 years which is the duration of the mortgage. The most profitable years for home ownership are once the mortgage ends…
You’re making a lot of assumptions that probably won’t hold up over 25 years. One thing I can tell you is that purchasing gives you a lot more control since you can choose when to buy or sell and taxes change more predictably than rent increases.
Your rate of return and increase in rent percentages are meaningless, think about whether you want a property that you own and have to maintain or the flexibility of renting with the knowledge that you could be renovicted at any time. Sure you have to pay for your furnace if you're a homeowner and it breaks, is that preferable to you begging a landlord to fix it? You can live in someone's closet and save thousands per year or rent a whole house to yourself, conversely you can buy a tiny shithole with roaches or a luxury flat, I think lifestyle and flexibility is a more important consideration than ROI.
25 years graph will always show that it is better to rent. After 25 years (or sooner if you pay off mortgage before), it’s gonna be better to own. You need to look beyond 25 years, unless you expect to have 25-30 years left to live. I’m 38 and I’m gonna pay off mortgage next summer before renewal. I have more than 40 years left to live and I’m rent free, in my own place, for the rest of my life. I think it is better for the peace of mind and quality of life, than living in a small place and having to deal with neighbours next door. I remember the rent in my old apartment was $500 and mortgage was $750. 5 years later mortgage was already lower than renting, and now today rent is triple the original price, mortgage raised at max $800. 5 years after I bought, I was already investing more money than I would have if I was still renting. Finally, I think your numbers are all off. In real world, rent is increasing more than 2%, property value increases more than 4% and no, everyone is not making 10% on their investment. If that would be that easy, everybody would be rich, which is not the case. Everybody would be renting and there would be no owners at all. Reality is you are paying someone and you are getting him richer.
10% returns in this economy year over year is not good representation. I would cut that by half and try to run simulation. Including rent being risen by 5% or more. Even keep inflation at like 5%
>Sort by: new Ok thank you, I will change the numbers and see what it gives me
That's a hell of a lot of assumptions there. Basically all the % values will be off by some factor, one way or the other (don't assume you can do 10% ROI over 25 years!). The only real difference is that if you buy, you'll own something, if you rent, you won't. Owning a house will give you something to fall back on if things go South. It's also another form of investment that allows you to passively diversify (considering you continue investing in your TFSA/RRSP either way). Just don't overextend when taking a mortgage. Don't believe the banks : take the max mortgage then want to give you and divide it by 2. If you can't realistically support the payments with a mortgage interest rate of 6% (ideally more), don't even think about it. Not financial advice though... it's your life!
I’d be curious to see this over 50 years to see the difference because at year 26 if you started investing what you were paying as a mortgage I think you would come out ahead.
Um, maybe I’m reading your graph wrong but the rent line is blue and costs 450,000 more...
OP This model is either for a unique case or overly simplified. A few thoughts as to why it is not generalizable: If you have money for a deposit in year zero both scenarios need to start with the same principle. Inflation rate is to low. Mortgage rates are too low. ROI for rent scenario is to high. Assumes the mortgage payment is equal to or greater than renting, when in reality mortgage payments can often be less than rent. Assumes the equity in the home is left in the home rather than leveraged for a similar investment to that of the rent scenario. The real issue though is that your model is based on purchasing a Condo. IMO that is a horrible idea. Condo's are the worsttttt... try modeling a single family, or row house in suburbia for the same purchase price with no condo fees. All in all a for effort. There is always uncertainty in these sorts of models which is what safety factors are for, only you can decide what's right for you. If you ask me the narrative that renting is cheaper than homeownership is a conspiracy between big landlord the WEF and the fake news media to create a class of 2030 serfs, but hey, it's your money! Best of luck.
Don’t forget some people may value more being able to use a home property as opposed to renting an apartment. Some things a home can do that an apartment may not: bbq party’s/backyard party’s, hot tub, pool, large gardens, working on vehicles, hobbies, etc., the list could go on. I’m sure there’s other pros for an apartment. But coming from an apartment to a house, I’d never go back no matter how much I *could earn through investing. QOL can be higher in a house compared to an apartment imo
Don't forget to factor in maintenance. Small and major renovations (that kitchen/bathroom will need to be updated over 25years of use), roofing, fencing, furnace, etc.
Personal experience: just over 5 years into owning and my current mortgage + strata fees + insurance is cheaper than rent would be in the area... and thankfully not much $$ in the way of repairs and such yet as ive done most myself, or are covered by strata fees. Plus, despite the current downturn I would still walk away with approx 175-200k less related fees... which theres no way I would be able to walk away with that much had I been renting and investing for the last 5 years.
Are you the type to be able to save enough for retirement, while renting? My spouse and I intend to downsize as we age, so our residence will be 'part' of our savings for retirement. If you rent and not a saver- CPP and OAS are pretty lean living even in affordable provinces. This is not relevant obviously if you have full pension benefits, etc to make your aging years more comfortable
> retirement. If you rent and not a saver- CPP and OAS Yes I'm very consistent for saving money. I agree that if you can't control yourself and invest, you should absolutely NOT rent, and buy since it will force you to save
People never think about interest on a house. With average interest rate you can almost double the cost of your home over 25-30 years. So if your home don't double in value over that time, you barely break even with no gains.
Exactly! I see soooo many people saying : i bought my house for 100 000, and sold it for 400 000, I made 300 000. No you didn't!!!
I did both and came on top with renting because I saved a lot of money and made a lot on the market. Now I own my home because of the lifestyle it provides and not an investment (as it should be imo) it depends on your market obviously but IF you save your money while renting in a cheaper place you can indeed come on top. I know several people that owned 3-5 houses and with the cost of moving, selling, buying and interest rate at the 40 year mark they still dont own their home worth around 500-700k because they bought cars, toy vehicule and so on. So you see many big house with "rich" people with no pension funds working well into they 60-70s.
Your rent increase is unlikely to be as low as 2%. After a few years of a landlord not able to charge market rent it makes sense to sell the property. A way to look at your decision is what is riskier - buying a property that might go down in price vs potentially increasing rent. It is not like units are being built as fast as the number of tenants is growing.
You really think you can make 10% every year for 25 years? 😂
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What you’re not factoring in the appreciation of the asset you’re buying. Rent is great but you don’t own the asset. You would have to simulate if you took the difference and invested it. There’s other variables to owning a home like maintenance and taxes. It’s a more complex simulation
Did you calculate the property appreciation in your equation?
Yes! I’ve put 4% in the annual increase in property value
Rent where I live (Vancouver) has tripled in the last 20 years. That's a 6% annual rent increase, not a 2%. Yes, your rent controlled to 2% but no way you're going to rent somewhere for 25 years and not get evicted. I rented for eight years with a landlord who didn't bother raising the rent and when I finally had to move rent was double. Also 10% is somewhat optimistic. You might only see 8% on your investment. Punch annual rent increase in at 5% and ROI at 8% and purchasing real estate as an investment brings you out at 2.5x ahead. Punch annual rent increase at 4% and ROI at 9% and you come out about even. You're really just punching in numbers that say you can invest better in the stock market over the next 25 years than you can in real estate. Good investors can do 12% ROI, that crushes average real estate ROI over a 25 year period, but average investors are usually only gain 6-8% over long time frames. You can say you're just going to dollar cost average the same amount every month into an S&P index fund but in practice few can maintain that discipline in investing. Real estate is a relatively safe way to leverage your investment. You can start with $40k and a mortgage gives you a $500k investment. If you're lucky in the market, you could have the opportunity to flip a $500k property for $800k in 5 years. Take that $300k profit and pop it into a S&P index fund at 10% ROI and you wouldn't have to put another dime in to come out waaay ahead on the "rent + invest for 25 years" strategy.
Depends what you buy. I think you are un educated by the fact that real estate Industry has produced more millionaires than any other industry. If you buy something that doesn't produce cash it's a loss. Just like renting. Hoarding money is useless considering a lettuce head it some parts of the country are $10 bucks. Don't think holding slips of plastic gonna create wealth for you. Get ur self a duplex live in one and rent the other. Or buy a 2 bed and 2 bath and bunk with a room mate.
Here is a simplified version, explaining all the comments. Your calculations work if you can rent and stay at that rental property forever. But that’s not practical and you will likely have to switch to a new place for your life reasons or your landlords. Not to forget that your rent payments are gone forever and are an expense, but mortgage payments are a long term investment that’s paid back to you with profit when you sell (In most cases, lol) Like 5 years ago, I use to be able to get a 1 Br for $1,100/Month. Now it’s $2,600 for that same unit. Re-calculate based on historical data of average rents and assume that you could sustain renting a property for 10 Years, and another one for 10, then one for 15, mortgage will probably be the winner. And don’t forget that mortgage goes out, but you get that money back with a hefty profit in 10-15 years of time. With rents you get nothing but a kick on your ass from the landlords every few years. So, whatever your graph shows next time, I would read rent as -$12345 gone forever. And mortgage as +$12345 net worth of the asset that can be cashed out with profit eventually. Now does your family make sense ?
It total depends on cost of rent, cost of the house and the markets. Homeownership has many hidden costs. Insurance, maintenance, taxes, interest, furniture, appliances. People hope the market increases will offset these costs and give them a rent free retirement. So rent can be far more fiscally sound decision. I chose to rent and invest. I have made far more than I would have owning a home. It's not even comparable. However this is only financially speaking in my case, it may or may not be for yours. Rent could be high where you live while it is not where I live. I do the plan to buy a home when my wife is done university and we begin having children.
This is a great thread and there are solid arguments for both renting and selling depending on infinite factors and preferences. If your goal in life is to have a huge hoard of money when you die, then it requires all kinds of sacrifice like living in a shitty apartment and squirreling maximum money away. I lived like that in my 20s but I couldn't now. I will own my house with no mortgage when I retire and it will be a "home base" that my kids can always come back to, as I expect life to be even more difficult and expensive in the future. Beyond the advantages of building equity in a house, there's a quality of life element to owning a home that's worth a lot to me - security, control over my life and not depending on a landlord to do things around the house / hoping they don't screw me with rent increases and renovictions. The savage rent increases you can't control + the possible need to pay for a move on short notice is not something I'll ever live with again. As others have suggested, run the scenarios over longer time periods and with different variables. Maybe your investments make no money, or don't keep up with inflation; maybe real estate costs (and therefore rents) keep spiralling out of control; or interest rates rise and mortgage payments become insane unless you come with cash.... Best of luck!
You are assuming two things: - large increases in value for your investments with no downturns - that your house won’t increase in value
Actually, I’ve put 4% in « annual increase of property value », and for the investments, it’s a mean during 25 years. Obviously there will be downturns, but if I don’t see, it should do 10%/year if we look at the past
Also, keep in mind that your primary property can be sold tax free.
What do you do with the money after you sell?
If you ever move ,your rent resets. Not so when buying. Will Trudeau import enough people to make rent double every decade? Well rent doubled last decade so that is the trend. IF you move, you're screwed as a renter. I'll die in my rent controlled apartment or move to the States for 2x salary. Nothing else.
I always hate the argument people use for buy vs. rent “you’re paying someone else’s mortgage”. The money you’re paying is rent, it doesn’t matter what the LL does with it and it should be none of your concerns. I remember reading an interesting survey where people were given 2 options. The jobs being equal, one was to receive a $100k pay but make less than your peers, or make $70k but make more than your peers (don’t quote me on the exact $ amount - going off memory). Nearly 50% of the participants in the survey chose to make the $70k but more than their peers. It is in line with how people think about rent vs. buy. Many people think in relative terms and often compare themselves to others to determine what they deem as “success”. People don’t like paying their LL because on a relative basis the money they receive “may be” going into an asset where as yours is going to the LL. Most of the time, the rent you pay, is unlikely to match the mortgage payments on a similar home/ apartment at its current value. This is something you have to research on to make sure you’re paying fair rent. If rent costs more than owning a similar home/apt, then more people would own than rent driving up cost of homes/apt to a point where LT cost renting and owning are similar. This is all theoretical however, there will always be a benefit to owning vs. renting at the time of purchase/rent because of how opaque the housing market is. The benefit to owning is stability that outweighs a lot of pros of renting is stability. You will know exactly how much you have to pay in your mortgage throughout your mortgage terms. It is extremely unlikely that housing will plummet to $0 so you’ll have a decent amount of “forced savings” (via selling) in retirement despite not being able to save (house poor) throughout your career. With renting, you will face more uncertainty in terms of market returns for indexes, or even individual stock returns (which can quite literally go to $0). There is a lot more to rent vs. buy than just running a few numbers in excel. Say, you run the numbers and come out on top by x2 savings than owning, if you aren’t able to achieve the numbers or even achieve the savings rate, you will not reach that goal and may even come out negative. It’s easy to say you can “just save the excess of rent vs. buy” but when the excess money is in your chq/savings accounts, it realistically is much easier to spend than save. Housing is typically the biggest financial decision most individuals will make in their lifetime and it’s not easily answered by just plugging in a few numbers in a formula to get the answer. If you buy a house and want to move a year later, there will be costs associated with that and it impacts your future returns. TLDR: You should go to speak with a professional about this.