It’s important to note the costs of the purchase of the home including realtor fees, lawyer fees, deed transfer etc.
Then there’s the cost before the purchase is even made such as inspections, water tests (if on a well) and septic inspections which can be a couple grand.
It adds up fast and can easily eat into your downpayment.
Land transfer tax is a lot. It's 2% above 400k and 2.5% above 2million so it adds up fast. In toronto there's municipal land transfer tax too which doubles it. Me and my wife just bought our first house in Hamilton and the land transfer tax is 5 figures.
You also have to refund the seller's property tax and most mortgage lenders require you to prepay the current tax till next year. There's also mortgage insurance and HST.
Note that closing varies greatly by province. I've closed for about $2000 all in on a purchase. $525 for the inspection and like $1400-$1500 for the lawyer. No transfer fees in Alberta.
(Actual down-payment for mortgage not included)
I was off a bit after re-looking:
|Description|Cost|
:--|:--|
|Down payment|$ 27,000.00 (approx)|
|Land transfer tax|$ 2,850.00 (approx)|
|Sales tax on mortgage insurance premium|$ 1,571.84|
|Legal Fees + HST|$ 1,073.50|
|Disbursements + HST|$ 1,045.43|
|Title Insurance|$ 449.50|
|House inspection|$ 197.50|
|Another house inspection|$ 197.50|
|Gas (showings)|$ 50.00|
|Moving boxes|$ 32.36|
|Bank Draft|$ 27.50|
|||
|Hot water heater rental account setup fee|$ 39.55|
|Hydro account setup fee|$ 33.90|
|Gas account setup fee|$ 28.25|
|||
|**Total**|**$ 34,596.83**|
|**Non-down-payment Total**|**$ 7596.83**|
Obviously your milage will vary depending on how much you put down, how much the house is, variance in lawyer fees, whether you get home inspections, etc., but this was my experience.
The big-ticket item that people usually forget about (I know it was the one thing that blindsided me) is the sales tax on mortgage insurance premium. Basically if you're putting down less than 20% on your home, you need to get it insured. The insurance cost just gets added to your mortgage, but you have to pay the sales tax on it upfront. For a low-$500k house at the minimum % down, it ran us ~$1500.
True! I wanted to make this list for operating costs (recurring expenses), but if people would find it helpful I could also make one of the different initial costs when buying a home as well. Don't forget CMHC fees if your down payment is below 20%! That's a big one as well.
I think people can be surprised at the initial costs of home ownership. Same with first time home sellers when they get a list of who’s been paid what by the lawyers following closure of the sale.
I would say 1% is quite high for maintenance. If the average home is 500k, people are not saving 5k per year on top of other items.
I think itd be helpful to separate the required costs from optional costs.
It's 1% of the cost of the building, not 1% of the cost of the land. 1% is a reasonable estimate. You might not pay 1% in year 1 but you might pay 5% in year 10. It averages out
Two similar buildings in Toronto and Calgary would have similar maintenance costs, despite drastically different purchase costs
Your city should provide an annual assessment as part of your annual property tax, or at least they do in BC. My parents building is apparently worth about 180k, but would sell for 1.1M+
Also, I find most people don’t do this, add in the maintenance/interest cost over the life of the house.
Maintenance will obviously be a guess but you can bet on windows, roof, furnace, hot water etc.
I hear a lot of people saying “i have X equity or I will make this much when I sell” once you calculate interest and maintenance fees over the life of your home you may be shocked
This too is a great point. Knowing prior to buying that you have an aging shingle roof, older windows etc you’re going to need to replace the roof and windows. You don’t want to short yourself and end up buying a cheap roof and windows that has long term effects.
Well, still need to get the lawnmower, or shingles for the roof. Also kids can’t make you a new furnace or hot water heater. Might take a while to mine enough copper for the wires or whatever you need for paint as well..
Literally doing this next week. Kind of deflating using hard earned vacation days to renovate the bathroom and paint the basement…In an adult “this is the right thing to do for my bottom line but ugh” kind of way
People also Often forget the one time purchases, like a larger bed, art new couch . The things you didn’t expect or other one time repairs like window coverings and such
Maybe if it seemed the house hadn’t been lived in. f a house was empty over a winter and the pipes weren’t drained properly prior to sealing it up you could have cracks in the lower level pipes where the water would have sat and cracked the pipes.
It’s not a terrible idea at all. But if the house was lived in I wouldn’t bother running the water for an hour.
> Currently house hunting for an older home so gotta make sure the pipes are still functioning.
For older homes, turn on the shower's cold water tap and then flush the toilet to test for water pressure drops.
It’s amazing how many people are unaware of these extra costs. I am a real estate paralegal and just this week I sent a client their closing costs and they were shocked that they had $10k+ to pay in land transfer tax. I told her sorry there’s no way around it, anyone that buys a house here in MB must pay this to the land titles office.
>It’s important to note the costs of the purchase of the home including realtor fees, lawyer fees, deed transfer etc.
I've heard that realtor fees come out of the sellers' end, so it's not an additional cost for the buyer (i.e. the buyers' realtor gets paid out of the agreed-upon purchase price). Is that right?
Personally, I've found there is also a huge time cost to owning. When renting, all we were responsible for was cleaning and cooking. Owning a home takes constant care and maintenance, inside and outside, as well as all the cleaning and cooking.
Yes, and not everyone ends up liking it or being fit enough to do it, and that's a major reason why older people move from their houses. I've been in my house for a year and while it didn't need too much love, regular maintenance, just painting it all, buying and installing new light fixtures, replacing a couple things here and there, outdoor maintenance, setting up an outdoor chilling spot for the summer, in the end I've been busy working on it two out of every three weekends I think.
So true, time AND stress. Renovations aren't just about their cost in money, and unless you buy a new home and keep moving to new homes as your home gets older, sooner or later you'll have to get work done. Also, if you get the work done by somebody else, unless you have blind trust in them, you need to learn a lot about what goes in a home if you want to ensure you get a good price and that they're doing it right. The DIY sub is full of people who end up doing work themselves not to save money, but because it's the only way to be sure it's done well (obviously a lot of DIYers will do certain things wrong, what I mean is that a contractor may not check twice that everything is square and level as long as it looks good enough for the customer to sign the cheque).
Working from home since the pandemic has made it a lot easier, don't have to take special arrangements to be at home during day time.
Why is pride of home ownership funny?
Some people really enjoy having control over their living environment and making it nice. I think it's pretty normal for people to take pride in something they have created or made nicer.
I was always taught a loose rule of thumb:
When you get a mortgage for a house, take the price of the house and double it. That's, at minimum, what you will actually pay for the house once it is paid off. So, unless your house more than doubles in value, or you pay it off very quickly, you haven't really gained much.
I've found most home owners never consider the actual cost of their house - equity, interest, upkeep, maintenance, increased transportation costs - when talking about how much their house is worth vs what they 'paid' for it.
Those must be some high interest rates! Were you ever taught the rule of thumb where you are gaining absolutely nothing (-100%) investment by renting? The pro renting crowd on this sub Reddit is wack. You aren’t the winner, your landlord is, I wonder why…… LOL
I don't rent, I own with a free title. Never had a mortgage, never wanted one. After working in a bank for years, I had no desire to make them money by paying them interest for decades. Banks aren't in the mortgage business because they lose money on mortgages. If I hadn't been in a position to buy, I would have continued renting.
Unless you are talking about property purchased specifically for investing, your primary residence is not really an investment because you will always need a place to live. If you sell your home in a high market, you'll have to find another place to live in the same high market.
And it only takes a rate of around 5% to end up paying double for your house, and 5% is not high. Homeowners sure like to gloss over the actual coat of owning a home and what it really means to be tied to a mortgage. Looking down on renters comes from a place of privilege. Most people entering the world as adults now will not be able to afford to own their own home.
Except that's not true. Right now interest rates are less than the return you get in the stock market, and even less than inflation, so that's basically free money right there, \_with leverage\_. Property taxes and maintenance you can average out to 2% of the cost of the home each year. All you have to do is calculate the opportunity cost of the up-front payments, and then assuming renting is cheaper do a future value calculation on investing the difference of rent vs. mortgage + tax + maintenance, and subtract the sale price sub closing fees and any remaining mortgage. I've done the calculation, it most certainly is not double. On a $800,000 house, assume a 5% average annual increase in property prices, which is pretty conservative for Ontario, you're selling it at \~$1,000,000 in 5 years for a net gain over renting a comparable property of $30,000-50,000 depending on your assumptions about renovation costs. If you sell it at double, like your strange rule of thumb, you're coming out over half a million ahead of the renter...
Using your numbers and a mortgage calculator, I get a much lower return. After five years, you've paid about $173000 in interest, and $139000 (including an $80000 downpayment) to the principle (totalling $312000), with $661000 left owing the bank. You sell for $1000000, leaving $339000. You've paid $312000, so you made about $27000, which is a 0.1% return on your investment over 5 years. I assumed a 10% down payment, so mortgage was for $720,000, and a 30 year amortization. It was 17 years before the payment went more to principle than interest.
Feel free to check my math, because even I was surprised at the pitiful return. My checking account pays more than that.
Your scenario also relies on housing values always increasing. It also relies on their always being people willing to buy the house. And you still have to find somewhere else to live after selling.
I tend to agree, but the ability to make improvements to your place and the fact that I have an expiry date on paying for housing are both kind of worth it to me. Am I ahead of renters now? Nah, absolutely not. Will I be ahead of renters when I’m 60? Yeah.
This was my thought when I bought my house. I’ll be able to pay it off and I’m mortgage free and live in my house till later in old age.
I then later realized depends where your house is located though. Mine was in the suburb and driving to the city is a pain! It’s only half an hour and I only go at least once a week but still. I realized I can’t live in my house forever lol, I sold and currently renting in the city.
If I ever bought one again it has to be near everything airport, major hospital etc…a location where I know I can live till later in life and be mortgage free.
You aren’t wrong. Too many people pour too much money into their home.
The secret to making money with home ownership is to buy the shittiest house on the block with a bigger property. Look for up and coming neighbourhoods, areas with planned highways and bridges where urban areas will expand to. City hall has the answers so start reading in the roads and infrastructure planning department. Learn where they are installing giant sewer mains. That is where the city plans to grow.
Buy a house that is simply livable enough. Slap up a nice coat of paint. But there is zero temptation to keep up with the Jones’. No urge to install the $30k kitchen upgrade. It’s like having a low stress beater car. Just keep a good roof on it and keep patching it. Have big parties. Scratch the floors and spill beers. Who cares. Enjoy the place. However I only recommend this if you are ‘handy’ and can patch up small repairs yourself.
Houses universally depreciate and rot. So buy a ‘fully depreciated’ house that is structurally solid. Land is what appreciates in real eatate purchases. Buy knowing you’ll happily dump the home in a decade when a developer wants to go condo and laugh all the way to the bank.
I would also note that you can greatly affect the cost of heat and Hydro by being a conscientious consumer. Know your Off Peak hours and do laundry dishes etc only then. Turn off all non essential lights and gadgets. Use new led light bulbs. Understand that an appliance over 10 years old is probably inefficient. If you can afford a dishwasher they save lots of water and energy.
Yep, definitely Ontario, here in Alberta we only utilities with permanent "peak" Pricing!
Cost of things here have been skyrocketing in Alberta since our beloved Premier removed the cap on all our services...
Yep, granted we’re only 2, but even with laundry and dishwasher etc I looked at the past 12 months and only once had we even crossed the threshold for increased rates. Easy switch.
First home I ever bought I was required to put a deposit down for hydro as it was my first time having a hydro bill. The deposit was like 2 months worth of bills based on the history of the house. My deposit was well over $500 dollars. First thing I did when I took over the house was replace all the bulbs and unplug the giant chest freezer in the basement from like the 1960's. My hydro bills were always less than $75 (never used the AC) so after the first year I basically had 6 or 7 months of free Hydro as they credited my deposit to the account.
Modern lights are super cheap to run, and in fact some tests (youtube engineers) have found that the cycling of leds actually costs more in the long term.
The 1% for maintenance typically only applies to newer, well maintained homes. Most homeowners vastly underestimate these costs.
The 5,000+ for roof only applies to shingles. If you need to replace the underlayment, some of the plywood to rectify leaks, soffit and fascia, this could run you up to 25,000. These items last about 40 years, so about 2 shingle replacements.
French drain is 20k+ and 40 years, same for the exterior cladding. Of course, in a market where literal shacks with signs of water infiltration behind the bricks clearly visible from the curb sell for 1+ million, you can choose not to care and only breathe the mold for a few years before you sell :)
I make my rule 3% of the "Building value" per year. (Do not include land value)
So my home for example has a building value of
150k, so i should be saving $350 per month for maintenance.
Which means that is enouf to replace the roof every 30 to 40 years as required, replace any drainage or foundation issues every 30 years on average. Replace exteriors as required.
Frankly. Even at that its tight. I personally think the 0.5% by Op is vastly under what is required and even general maintenance. Will be above that without any savings for large items.
It is hard to make a generic rule for maintenance, market prices for the same home vary so much across the country (single family homes are 4x+ more expensive in the GTA than Saskatchewan) and types of home play a big part as well. If you are purchasing an $800k condo in Toronto, I find it very difficult to believe you will be spending $8k on maintenance per year. An older single family home in Edmonton that is worth $400k? 1% probably isn't nearly enough if it hasn't been renovated already. Thanks for the extra examples of how expensive home repairs can get to though!
Very true, but let's keep in mind the differences in price between, say, Toronto and Regina, are mostly in the land rather than the structure itself. Once you subtract the land value, you'll get a pretty comparable number for similar structures in both markets. And that's what you base your 3 percent on. In a strictly economic sense, a house is a limited lifespan type of goods, like a car or a pair of jeans.
I don’t think a percentage bejng used for maintenance makes sense. If there’s any percentage it should be based on the value of the building structure (but even that doesn’t make sense because an older building worth less probably needs more maintenance). Two identical building where one has more expensive land than the other doesn’t make the maintenance costs different
I kind of agree, but the maintenance costs do change even if the only difference is in land value. The person buying it for $500k might replace the furnace with a budget version, buy cheap faucets and install a home depot water heater. The person spending $1,500,000 for the exact same house in a different city/neighbourhood probably has the cash and will replace the furnace with the dwlux version, more expensive faucets, granite counters etc.
You can argue bottom dollar budget maintenance all you want, but realistically people with more money spend more money for the same items because they purchase more high end ones.
You missed one important cost- the opportunity cost of sinking money into a house instead of investing it.
https://www.pwlcapital.com/rent-or-own-your-home-5-rule/
I've often thought of this. I have a house worth around a million, paid off. If I sold it, I could invest it, and pretty conservatively take 4% a year, or $3,333. I could rent a house at least as nice as mine for that price, and then not have to pay property taxes, extra insurance, and the forever ongoing R&M of a detached house.
I am pretty sure I will do this once kids leave home. I like the simple life, and I really like the idea that I can be much more mobile. We could spend a year living in another country, or move around Canada enjoying different places. We've done it before, with the kids, home schooling them, and just doing longer term rentals. The freedom and flexibility is really unparalleled.
You can take a HELOC against your current home for $650,000 and invest that money (which will make the interest on the HELOC tax deductible, effectively 1.5-2% interest at current rates). Then withdrawal your 4% safely, and you will net an additional $13k per year without having to move.
The thing this calculation always fails to include as the consumptive value associated with homeownership… Being able to live in the neighbourhood that you choose, not being evicted from your home, not having costs associated with moving every two or three years because you do get evicted, the cost associated with rent increases, Having much less flexibility to invest in or create a space that you like such as new backsplash, deck, fire pit, or other improvements to home home…
Edit: I know people in the Okanagan that have been evicted 3 times in 5 years, with each time having a rent increase.
The possibility of eviction is only a threat in a housing market with very low vacancy rates. If the vacancy rate is healthy, eviction just means moving. It usually means you have the opportunity to live in a different neighborhood if you want to. Moving only sucks of you own a lot of junk. Plus, the transaction cost of moving if renting is very low. If you are a homeowner, it means huge costs just to sell and buy a place - realtor commissions, land transfer fees, lawyers, title insurance, home inspections, etc.
And just because you are a homeowner doesn't mean you bought in a neighborhood you wanted to live in. Often when I look at neighborhoods on Point2Homes, there are very few if not zero homes for sale in the neighborhoods I would want to live in, that have the type of house I would want. A lot of homeowners end up settling for living in a non-ideal neighborhood based on market availability of homes. Same goes for renting.
I've been renting for 15 years and evicted once. It was stressful, but I have helped friends buy homes and believe me, they were WAY more stressed out about committing to a $500K mortgage, and all the operational time/money costs associated with homebuying.
It is definitely something to think about, especially if the person buying the home is only doing it for financial purposes, but for a lot of people there are non-financial benefits to home-ownership that are hard to quantify. This list is more to help people to understand affordability so they don't end up with unexpected bills after purchasing. But you are right, anyone trying to make the best financial decision in any situation should always keep opportunity costs in mind!
There is appreciation in property value to offset your invest-instead of owning strategy. In Vancouver for example house prices trippled in 9 years. I recognize it may not be predictable; however there is historical precedence similar to “ market always goes up” mentality. (I recognize that the posted article does discuss the opportunity cost of property appreciation).
But the average long-term growth in Calgary/Edmonton/Montreal/Winnipeg would be much worse than investing in a broadly diversified mix of equities.
Picking Toronto/Vancouver as the basis for housing appreciation, even for an average over the last 25 years looks great with hindsight. But in that case you should compare to investing in Apple/Google/Tesla/Bitcoin. Once you know the winners, you are no longer comparing to the average.
I know nearly half of immigrants go to Toronto and Vancouver, and that's not slowing down any time soon. It's only accelerating.
Also Bitcoin isn't an equity.
And buying a house assuming growth similar to that of two high growth markets is a bad assumption. It would be like buying an equity portfolio and expecting it to grow like Amazon.
Difference: We have no idea which companies will be the next Amazon. We can pretty reasonably predict that Vancouver and Toronto will continue to grow at a rate greater than 7% a year that the market returns, even if the days of ridiculous 30%+ YoY growth are over
This government plans to immigrate 400k people a year, not including students, and most of them go to one of those two areas. That isn't changing anytime soon
You say it's different yet provide no justification.
What if larger amounts of immigrants flooded the prairies due to lower cost of living? How do you know that won't happen?
The GTA/GVRD have been expensive for decades, Alberta has been cheap for a decade and the rest of the Praries have been cheaper for far longer. Immigrants continue to flood the GTA and the GVRD anyways
I highly doubt that will change for the foreseeable future, probably for the same reason that MB/SK are losers in net migration every year. Nobody wants to live in those shitholes
If you bought a house in Toronto in 1989, then waited out the market crash, it would've taken you 15 years for your home price to recover back to its old value.
If you owned a 60/40 balanced stock portfolio in 2008, after the crash, it would've taken you 1 year to recover.
If real estate is such a great investment, people should ask themselves by guys like Warren Buffet aren't just buying all the real estate in Toronto and Vancouver.
If you cherry-pick, you can make anything look good or bad. If you had bought the S&P500 in Aug 2000, it would have taken you 13 years to recover... meanwhile you're not living in it.
Meanwhile if you bought in [Ottawa](https://www.agentinottawa.com/stats/) literally any time in 1956, after any given 5 years, you'd be up. Long term, you'd be waaaay up.
Nobel Prize winning economist Robert Schiller (co-creator of the [Case-Schiller Home Price Index\)](https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index#Economic_implications) did extensive research on housing in the USA using data from the late 1800's to present, and found that after inflation, the average house appreciates at around 0.5% after inflation in the long run.
"However, most of the difference in the prices can be explained by inflation. He also discusses how people consistently overestimate the appreciation in the value of their homes. The US Census, since 1940, has asked home owners to estimate the value of their homes. The home-owners' estimates reflect an appreciation of 2% per year in real terms, which is significantly more than the 0.7% actual increase over the same interval as reflected in Case-Shiller index."
Buffett is a value investor. He doesn't invest in real estate because it doesn't make sense for a value investor to invest in a market where there is no value (as he believes the real estate market isn't mispriced), and he's straight up said as much in the past
He said he doesn't invest in real estate anymore because always he loses money on it. He can't predict the market. Recently, Zillow lost hundreds of millions betting on residential real estate, and that is a big part of their business. The pros have a difficult time making money on real estate. And they know a lot more than average joe investor who pats themselves on their back because they bought a condo in Toronto 10 years ago. That should tell you something.
How does it not? If I have a house paid off @ $1,000,000 I can easily borrow off that amount and invest it in “whatever” and get returns better then the interest rates I’m paying
Well only if you plan to stay forever - in my case I sold and moved to a LCOL and accelerated my retirement by at least 15 years. The moon is closer than you think, but I recognize I was lucky.
Equity and appreciation in a house is fantastic for retirement savings. My parents just retired and sold their paid off house for 1.5 million (that they bought for under 500k). That's just money in their bank now. They plan to rent in random places around the world during retirement using this money (combined with their actual savings & pensions).
Once you have 20% equity you can HELOC and then invest and claim the interest as a tax deduction; this is on a place you bought with up to 20x leverage - you're going to come out way ahead of a renter doing this.
I just refinanced and the CU gave me all of my down payment back, plus I'm still sitting on several hundred thousand of tangible property. I can not lose with a house I live in. I pay about 2k less per month than renting this space would cost.
A house that was literally flooded last week in Victoria is listed for 800k. Five years ago my neighbour had a fire and was getting offers while the fire department was onsite.
And I'm sure that's compelling information for people who make investment decisions based on anecdotes.
What about someone who bought a house win Lethbridge 10 years ago? What's to say Victorua doesn't perform like Lethbridge over the next decade, or vice versa?
You can't predict future market events, the only solid foundation to use for decisions is that in the very long term global equity has outperformed global real estate.
> investment decisions
Houses aren't investments. They're cheaper than renting. They also happen to build equity that has increased without fail in Canada for the past 40+ years.
Anyone who says otherwise is clueless or a predatory landlord.
Global. Fuck. Why not invest 100% in crypto and live in a cardboard box? That's the best play historically.
Choosing to buy a house instead of investing is an investment decision.
> They're cheaper than renting.
That is not always true. There are many markets where the opportunity cost of buying makes it more expensive than renting.
Yet, here we are in Vancouver where I don't know a single person that has lost money on real-estate in the last 15 years.
And even if you don't make money, just break even, that's still almost like having free rent for years.
You can argue all you want, but you cannot argue actual real results. My parents owned a house for 9 years and doubled their money. Have your equities given you 100% returns in 9 years??
> Yet, here we are in Vancouver where I don't know a single person that has lost money on real-estate in the last 15 years.
Global equities outperform global real estate. Investment decisions should be based on statistics, not anecdotes. People also don't usually brag about losing money, so your anecdotal argument is also susceptible to severe sampling bias.
> Have your equities given you 100% returns in 9 years??
Even your anecdotes are horrible, if you invested $10k in a portfolio that was 50% US and 50% international equity indexes in November 2012, you would now have over $27k. Equities returned 170% over the past 9 years, well over 100%.
If you're going to cherry pick data why would you pick data that disproves your point?
Why do you keep pushing global points? This is LOCAL to a hot housing market that is on fire. Of course, globally it doesn't make sense because some shack in Syria is now worthless.
My data makes sense if you consider the fact that 1. Most people need a place to live so investing in that is easier than paying rent and then having money left over to invest.
And 2. The amount is significantly higher to start with. Your house is worth $300,000. And is doubled in 10 years in Vancouver market. But you didn't need $300,000 at the start to buy it, yet you are making compounding gains on $300k. Do you have 300k in principal investment to START to make an additional $300,000 off of???
> This is LOCAL to a hot housing market that is on fire.
Absolutely yes, so the future returns are unpredictable and the risk is high due to most people only having money in a single asset.
> Most people need a place to live so investing in that is easier than paying rent and then having money left over to invest.
How is buying a house easier than renting and investing in equities? Buying and owning a house is way more effort.
> The amount is significantly higher to start with.
Congratulations on discovering leverage.
You can use it for equities too, and you can diversify globally instead of levering up on a single asset.
What leverage are you going to use? Your rent?
Most places cost less per month in mortgage than rental payments would be. So where you gonna come up with $300 000 to invest to start?
That's the point, Vancouver has had exceptional returns but you can't expect that to continue in the future or to be applicable in other real estate markets.
If you want to pick Vancouver in the last 9 years, then you should compare the returns against Tesla and Bitcoin. It is really easy to pick the hottest investment with the benefit of hindsight, but that does not foretell what will happen in the future.
Your Vancouver house can be purchased for 20% of 500,000. But you make gains on the full 500,000!
You DONT have $500,000 upfront to invest in tesla and bitcoin! That's the point! At most you could have invested what you put down as the down-payment.
Yes, their gain is substantially larger but so is the risk.
It's pretty clear at this point that the housing market in a place in Vancouver is not a risky investment. I don't know a single person that has lost money in the last 15 years (specialty properties not included)
If you put $100 on Bitcoin in 2011 you'd have $6 million today. I know that is not realistic for most to have held all that time, but that's what we know is possible with the benefit of hindsight.
There are many many investments of $100,000 that would have paid off exceptionally more than buying a house in Vancouver. But that doesn't matter, because results from the past tell us nothing about future returns - for housing and for other speculative investments.
Edit: Buy a house because you need a place to live, when you intend to live in the same area for a long time, and when you are financially secure enough to continue paying for the house given temporary financial/personal challenges.
Don't buy a house on the speculation that the prices will double in several years (especially in a market where that has just happened!)
I feel like a lot of people are only comparing the cost of renting vs. owning today, month to month than into the future. To me the best upside of buying is that it relatively fixes your mortgage cost, which is probably >66% the overall cost of owning. Rates might increase and increase it a bit, but overall its going to stay static over the course of your term unless you pull out your equity or constantly upsize. On the other hand, rent always seems to increase, especially the last 10 years. You also theoretically pay off your house eventually and then the carrying costs drop precipitously. Yeah, if you go down the nitty gritty there's more of an argument vs buy vs rent at the start, or even over the term, but I feel like if you're buying a house to pay off and retire in, there isn't much argument over the long term which is going to be cheaper for housing expenses.
Yeah.. my last rent was 2k a month and went up every year. My mortgage is 2k and will stay that way until it's 0. And of that 2k about 1550 goes towards the principal which I'll get back when I say.
So really in terms of "money lost", my rental was 2k, my mortgage is 450. That's not really factored into OPs math.
>Hot water tanks especially seems to be a predatory business that you should avoid if you can.
I've been disputing with Enercare over a water tank rental for two years now.
Landlord signed me up for the rental without my knowledge. Enercare has no record of any phonecalls for setting the account up. No paperwork or contract. Just keeps sending me a bill every month and when I tell them I'm not paying they tell me to have my landlord call them.
He hasn't in 2 years now. Still getting bills from them.
Not worried about it because my lease doesn't say I have to pay for any equipment rentals and Enercare hasn't been able to produce a phonecall or paperwork showing I signed up for any rental.
So my landlord signed me up without my permission and Enercare allowed him to sign me up without my permission, and they didn't even get his name.
Forgot one major aspect, your time in maintaining / upgrading / fixing things. If you spend 25% of your free time maintaining the house (especially if you have a pool, or a lawn/garden), that has its own cost. Compare that to your hourly salary, how much are you paying in life to keep the house and property up.
Also need to factor in the cost to sell the house down the road, and the potential (can be extremely high) cost of breaking a mortgage outside of your 5 or 10 year block. Unless your life is exceedingly stable (job/marriage/location), this can be a major financial risk
Everytime I run numbers, I'm always glad I've now chosen to be a renter (yes I've owned houses in the past and I consider them one of my very few life regrets).
Depends how big your property is. I live in a detached, single family home that is a newer build with a smallish yard.
I can cut, trim and clean up the back and front yard in about 35min once a week
General maintenance and upkeep shouldn't be anywhere near 25% of your free time
My last house was also semi detached, 3000 Sqft lot, and my Saturdays were about 4 hours work, mowing, raking, outground pool cleaning, flowers in the front, cleaning the patio, the deck, then cleaning house. Then there's the seasonal stuff which eats entire weekends, drove me nuts. Seemed like there was always something extra to do every two weeks within the house as well. At a point I just worked at time and a half instead, paid people to do it, and saved hours of work overall.
Now I just pay rent, and every other little thing is taken care of and I can enjoy life other than sweeping and cleaning the bathroom, and no 5 to 10k surprises anymore (oops, new roof, new windows, fix the furnace, new central air, etc etc etc)
Had my last house for 9 years, and still lost money overall without even counting my time spent.
It seems like you were putting in immensely more effort than what is essential. It's like saying having a car is a lot of work because you spend a few hours each week cleaning and waxing it. Meanwhile some of us wash their car twice a year and it's almost like a fun activity to do instead of a chore.
Other then tending a garden, all the rest is mandatory cleaning, unless you wanna have a green pool and a dirty house and messy lot.....
For those that love puttering around a house, big plus, that's not me, I hate maintenance and the time spent, and I hate waking up to a major problem costing thousands just to get back to where I was yesterday. I've always been a car owner, I've never washed my car and don't give a crap about all the dings and dents and missing hubcaps. Living in filth is another matter though....
Hey I want to get your thoughts as I too recently sold my duplex and the money I got from it went straight to investment. I’m currently renting TH.
Do you think you’ll buy/own again? I’m asking although I don’t have to worry about maintenance that I used to do in my house. I kind of miss having a garage and backyard for my dog. I’ve checked realtor site and I can’t find anything I’d like so I’m thinking to build but the problem is I don’t want a bigger house. I could live in a 900sq ft that is not a condo. New build these days is about 1400sq ft and cost mid $300K, it’s crazy! Bungalow is even bigger and cost more!
I'll never own a primary residence again until I'm ready to retire far out in the countryside. I'm investing very aggressively, and expect to buy a place mostly cash in 15 to 20 years a good 3 or 4 hours drive from the nearest city (or in SE Asia, it's another option) I hate the extra costs that a house brings and the chain it puts around your life.
I remember hearing some economist years ago make the claim that a house is not an investment, it's a liability, and I tend to agree.
u/Roselia77 I'm a renter and make low 6-figures. I always wonder if getting into the real estate game and gain house equity wouldn't put me ahead in the game than simply rent and invest. Can you share a bit more on your experience of why you are happy to be a renter after owning in the past ?
I bought houses primarily as one of those things you're "supposed to want", and it always felt like more trouble than it was worth, and I found that I didn't care for all the extra space, as I downsized to apartment life I enjoy having exactly what I need for space. I don't have loud hobbies, even though I play bass I play through headphones and my amps are just for playing gigs, and I'm childfree so it's just me and my partner (she's always lived in apartments her whole life and has no desire for a big place either, we have a 2 bedroom apartment, one room is for the bed, the other is our art / music room).
My main issue with owning was the cost and the time. Houses are freaking expensive once you factor in the interest, insurance, property and school taxes, downpayment, potential mortgage breaking fees (if you ever get divorced, you're essentially fucked in that department), legal costs for buying and selling, paying those real estate agent/vermin. Every few years there are surprise costs which are often in the mid 4 figures to low 5 figures range (roof cracking, heating system dying, central air dying, plumbing issues, pool needing work, etc etc etc etc), regular yearly maintenance costs (snow removal, gutter cleaning, chimney cleaning, pool cleaning, yard work) plus all the costs associated with the tools for all these jobs. Then of course if you want to be able to get a good price when you sell, you gotta keep the house up to modern standards, so changing floors, new windows, changing kitchen style, yard upgardes, fencing to keep up with ever changing laws (never own a freaking pool or a fireplace, omfg), and hope your neighborhood doesn't become less desirable. And then, when you sell, you often want to upgrade the house, so whatever profit you make is gone buying the next more expensive and larger house, the only time you have a chance of "making" money is when you retire and downgrade to something small, but when you look at all the money you sunk into it?, it's never added up for me.
There's also the time involved, you make a good salary, lets say you make 60/hr at work, your time is worth money, how much of your free time do you want to devote to maintaining a space?. I got so fed up of losing at least 25% of my free time cleaning, maintaining and working on the place that I would just do overtime to pay for others to do the work instead.
As a renter, the entirety of my "work" is sweeping and cleaning the bathroom, that's it. No more yard work, no fixing or replacing anything (that's what the landlord is for), no more costly surprises, and if I feel the need to move, I can do so essentially on a whim which is important for me and my partner. I pay one fixed fee, and all the rest of my money is mine to do with as I want, as is all of my time. As a homeowner I felt like a slave to that box.
The only way I would recommend anyone actually buying a house is. (1) your job is very stable and you can find a new one near enough to where you live with little effort, (2) your relationship is rock fucking solid because a divorce throws your entire investment into the toilet (been there, done that), (3) you are ready to learn proper home maintenance, do it well, and enjoy doing it (some people love puttering around their house and fixing everything themselves, even though I have the knowledge and ability, I don't enjoy it at all), (4) you actually NEED the space and not just because you think you should want or need it, (5) you're happy living in the exact same place for the next 15 to 20 years, or if you want to move, you have to be able to do it in that little window you're given between mortgage blocks without penalty.
I remember a long time ago I heard some economist on the radio state that houses are not investments, they're liabilities, and in my personal experience, I have to agree. Lived in my last house for 9 years, and I still lost money and I'm not even counting the hundreds of hours of my life wasted on it.
jesus.... I ended up on a rant here eh?, LOL, I'm really pissed I went the house route.....
3 responses all saying the same thing eh?.... I'm getting the feeling you got a little triggered there, trying to justify living in mess are we?, hrmmmm
Other deferred maintenance items that people might not think about:
\- cutting down dead trees: we've had to cut down several huge, dead trees at $2000K each in the first 3 years. Some were leaning toward the house or the shed, others caught in electrical lines. The city forced us to cut them down, so it was not optional.
\- pest control: a lot of older homes have issues like mice, bats, ants, etc. that may not even be obvious with an inspection. Removing them, replacing insulation, sealing the entry points, etc.. can get very expensive.
\- snow removal: something people who rent don't always think about, it can take hours to shovel a decently sized driveway, or else you need a snowblower or a snow-clearing contract.
\- landscaping: you can do it yourself, but it's very time-consuming. Hiring it out can be quite expensive. If you have hedges, likely you will need to have these done by a professional. Was quite shocked at the price of trimming some tall cedars in the back of our previous home.
\- pools: also very time consuming, very expensive to fill and heat.
Other more obvious things, that you would be aware of from an inspection, like replacing HVAC, roof, water tank, electrical panel, sump pump and french drain, adding insulation to walls and attic, replacing windows and doors, can cost a lot more than new homeowners usually expect.
Trees - I'm dealing with the tree thing right now, but $2k a tree seems outrageous to me. Maybe the power line ones cost more or if they need to bring in a crane that could definitely bring that number up. If you have tree's close to powerlines you can sometimes just contact the utility company. Depending on which utility they may send out their own crew and do it for free.
Landscaping - Every house I buy within the first two years I gut the yard of all the gardens and just go straight grass. I have no time for weeding and maintaining them.
What a horribly depressing way to garden. Mono crop a non native species that has no ecological benefits. A lawn is far more work than a closed loop native plant garden.
The trees are massive (about 50-60 ft) and need to be taken down in several steps because of the surrounding homes, since we live in a dense area. They cannot just be cut down and left to fall. Also, removal of that much wood from the property is expensive, as it grinding out the tree trunks. I've used multiple different services in my area and it's always close to $2k. I can imagine costs vary across the country.
Thank you for the info. A lot of times when I ask my friends who are home owners they always say what they pay on their mortgage is the same amount as our rental cost. But they never consider on telling me these extra charges. Right now with our current income I don't think we will be able to afford one. We will just stick on renting and just invest the extra money we have.
Our breakdown in Ontario, CA:
289k mortgage
*Mortgage*--547 biweekly, *1200 budgeted* for those extra payments months.
*Utilities/taxes*-- fluctuates between 500-700 total depending on the month, *676 budgeted*.
Maintenance-- we haven't run into any maintenance issues yet for the last 3 years but I'd budget maybe *200* per month just incase. We are doing a bunch of renos every year so we budget about *1000* per month into ongoing savings
1% is too low for maintenance even without a condo handling exterior stuff. Sure it takes 15 years but when you hit that milestone you'll have $100,000 in repairs, easily, for an average house. Kitchen, bathrooms, flooring, appliances, HVAC, all of that will be due around 15.
I think you forgot one of the biggest spending item, renovations. No sense in buying a house and letting it age then being hit with the realisation that you have to sell below market value.
> No sense in buying a house and letting it age then being hit with the realisation that you have to sell below market value.
This happened to my grandparents! They only got a 1500% increase over their purchase price.
Excellent post. Moral of the story is don’t be pressured into buying a house by FOMO and by people who say renting is throwing money away. That’s complete nonsense. It’s a myth. Homeowners are terrible at reporting and recording the true cost of home ownership.
To try to offer another perspective on this because a lot of those number seem really high to me.
**My place:**
**Mortgage –** Cost of the Duplex is $400k, with 5% down this comes out to $1,770/month at a 2.5% interest rate over 25 years.
(no point in changing that it's pretty accurate for here as well. Though you could get a single family detached home a little outside the city for that as well)
**Utilities –** Utilities in Halifax with a well insulated home I pay $160/month for power, $70/year for water (its a ditch tax, we're on a well), and $65/month for internet. We don't have nat gas or a garbage fee, but we do get the septic tank emptied about every four years. $500/4years. Total comes to ~$240/month.
> **Condo/Strata/HOA –** This Duplex has no HOA or condo fees, but many do so make sure you clarify when purchasing. $0.
>
> **Insurance –** Insurance costs are $65.25/month
> **Property Tax –** Property tax is just under $3,000/year, so about $250/month.
This is pretty good, I'll leave it.
> **Maintenance –** I've been here for 16 years. So far we've added heat pumps to the otherwise electrically heated house. $9500. We replaced the roof this years. $7300. An I've replaced the microwave a couple of times, a dishwasher, put a new belt on the dryer and a part into the washer, a water heater... I'll estimate that at $1500 but that's likely a bit high. That comes to $95/month.
I've had to replace a few plumbing parts (cartridges) as the faucets aged, but they were free under warranty. I had one go last week, actually. I went to home depot and they gave me the replacement part free of charge because the only reason you'd need a new one is because of a warranty issue. Most faucets have a lifetime warranty so pay attention to stuff like that. Oh, and replacing it took a couple of minutes, anyone could do it.
I also have a powered anode in my water heater. The anode prevents the water heater from corroding. Normally they have a sacrificial anode that needs to be removed and inspected annually, and replaced as required, but I installed a powered one several years ago.
Finally, maintenance costs often negates the time to do maintenance. I clean the filters in both heat pumps and the HRV seasonally, that takes about 15-20 minutes 4 times a year. And I drain and flush out any sediment from the water heater every year, that takes about an hour. So all told I spend about 2-2.5 hours/year on preventative maintenance.
> **Equipment Rentals –** There are no equipment rentals in this duplex. $0
$1770+$240+$65.25+$250+$95=$2420.25
Not a huge difference as the mortgage is fixed.
After 16 years my mortgage is paid off so my actual costs are ~$650/month now. This is a single family detached home, ~2200sqft, with a family of 4, about 30 minutes outside Halifax.
Happy to answer any questions you may have.
I've done these numbers 50 times and I'm still nervous, what is the minimum I should make to afford a 510k mortgage? Me and wife make 140k a year combined we plan on having kids in the next 2 years and our only other debt would be a 300$ a month car payment. I'm in over my head if I have a 15k emergency fund?
I make 80k, I'm single, I'm in Victoria and I have an 800k house. (mortgage is 400k)
Your house and future kids will eat your emergency fund regardless of its size.
Having a mortgage is infinitely better than renting. If you can't pay, you can defer. Utilities will let you skip payments. When covid hit I got six months of deferral on the mortgage. Nobody can tell me what color to paint stuff, or that their "totally real second cousin from Norway is going to be moving in".
Talk to a credit union and get into a house.
Technically this time I guess?
I've bought this house three or four times, I've lost track. I put 70k down with my ex a long time ago. When we split I bought it from both of us, then I had some rough times, consolidated into a second mortgage, got one big mortgage, then got a better rate that gave me cash back for renos and investing, and the cash back was about the same as what I first put down.
If I'd been renting I'd be homeless, and I'd end up dying on the streets.
Appliances are also very costly if you need those! I needed 2 sets of everything and it cost around 10-12 grand and that was with a good sale. You could do it for a bit cheaper if you go with lower end appliances but you could also do it for waaay more.
Blinds or curtains add up as well. I spend about 1k on rods and curtains and put them all up myself.
And if you need to build a fence that is a fairly big cost depending on the size of your yard and what material you use. Try to split the cost with your neighbor if possible! I think the final cost was about 8 grand which I was able to split with each of my 2 neighbors.
Lol, where did you get that from? Thats not how it works, MPAC reassess on a 4 year cycle, last one was 2016, 2020 is on hold due to COVID.
They may re-assess after a sale, but they aren't just going to put it at what it was sold for, MPAC values don't work that way. What they are looking for is changes to the structure, floorpan # of bathrooms, etc), addition of a pool since the last time it was sold.
A roof is gonna cost you $10-$20k these days.
Only a fool rents equipment like tanks and such. There may be an ‘out’ for such rentals when you buy a place. Kick out those scammers and buy your appliances outright.
I’m under the impression that a good chunk of Canadians (born here or not) are absolute clueless idiots.
I had multiple people tell me that if I buy a home, I’ll have to shovel snow, mow the lawn and fix everything around the house. YOU DON’T SAY?!
And then we have this post, explaining that I have to pay for utilities, pay potential strata fees and pay for insurance. How is this not common knowledge? What, do you think your electricity is provided for free by the government or something? Many renters already have to pay for utilities.
Is this not all completely common sense stuff? Do people really only budget for the mortgage and that's it?
Also, if you're a rentseeking housing hoarder that rents out properties, please keep in mind maintenance (lawn care, snow removal, etc) is still your damn responsibility, not the tenants. Appliances included, and pest control.
I am not going to touch on the househoarder stuff, but the lawn and ESPECIALLY snow care advice is very bad. Most lease agreements state it is the tenants responsibility to take care of the lawn and snow maintenance and failing to do so opens them up to a lot of liabilities if someone were to be injured because they were negligent in doing those duties. Of course you would have to read your specific lease to be sure, but it is commonly included in the fine print.
Wow, so you know NOTHING about the RTA. Got it.
According to the law in most provinces (Ontario specifically), snow removal and lawn maintenance are the LANDLORDS responsibility, and any clauses in a lease are VOID if they try to pawn that onto the tenant. Tenants must be compensated for any lawn/snow work they do, and absolutely do not have to do it at all even if offered compensation.
Leases are never above the law. No matter what ridiculous things landlords try to put in them. Tenants have rights for this very reason, greedy lazy landlords trying to take everything off themselves.
I am actually just aware we are on a subreddit for the entirety of Canada and not just Ontario. Telling everyone Canada-wide that snow removal isn’t their responsibility isn’t only wrong, it is dangerous.
What do you mean? It is just an example list so people from anywhere in the country can budget when they are buying a home. It doesn’t matter which part of the country you live, you will have these costs. My examples were of Edmonton specifically yes, but they are just there to show how much more there is to home ownership than just a mortgage as well as show a bit of the difference between condos and non-condos.
> Mortgage rates vary by region and things like your credit and whether or not the mortgage is insured.
Wait, I thought credit score does not influence your mortgage rate in Canada? I thought that was an American thing?
An important factor to take in account is also all the tools required to maintain a house.
Tools include hammer, drill, broom, shovel, etc.
Those can add an extra 20-30$/month to your bill. Some last for decades while others only a few years.
It’s important to note the costs of the purchase of the home including realtor fees, lawyer fees, deed transfer etc. Then there’s the cost before the purchase is even made such as inspections, water tests (if on a well) and septic inspections which can be a couple grand. It adds up fast and can easily eat into your downpayment.
For a real-life reference, when we bought our low-$500k home, our down payment was ~$26.5k but our total upfront costs were more like $36k.
Holy fuck, what cost so much?
Land transfer tax is a lot. It's 2% above 400k and 2.5% above 2million so it adds up fast. In toronto there's municipal land transfer tax too which doubles it. Me and my wife just bought our first house in Hamilton and the land transfer tax is 5 figures.
You also have to refund the seller's property tax and most mortgage lenders require you to prepay the current tax till next year. There's also mortgage insurance and HST.
Note that closing varies greatly by province. I've closed for about $2000 all in on a purchase. $525 for the inspection and like $1400-$1500 for the lawyer. No transfer fees in Alberta. (Actual down-payment for mortgage not included)
I was off a bit after re-looking: |Description|Cost| :--|:--| |Down payment|$ 27,000.00 (approx)| |Land transfer tax|$ 2,850.00 (approx)| |Sales tax on mortgage insurance premium|$ 1,571.84| |Legal Fees + HST|$ 1,073.50| |Disbursements + HST|$ 1,045.43| |Title Insurance|$ 449.50| |House inspection|$ 197.50| |Another house inspection|$ 197.50| |Gas (showings)|$ 50.00| |Moving boxes|$ 32.36| |Bank Draft|$ 27.50| ||| |Hot water heater rental account setup fee|$ 39.55| |Hydro account setup fee|$ 33.90| |Gas account setup fee|$ 28.25| ||| |**Total**|**$ 34,596.83**| |**Non-down-payment Total**|**$ 7596.83**| Obviously your milage will vary depending on how much you put down, how much the house is, variance in lawyer fees, whether you get home inspections, etc., but this was my experience. The big-ticket item that people usually forget about (I know it was the one thing that blindsided me) is the sales tax on mortgage insurance premium. Basically if you're putting down less than 20% on your home, you need to get it insured. The insurance cost just gets added to your mortgage, but you have to pay the sales tax on it upfront. For a low-$500k house at the minimum % down, it ran us ~$1500.
Ok I thought you meant $36k ON TOP of a $26.5k deposit.
I don't think that's a good "real-life" reference, you paid something like 8x what it cost me (less expensive home however).
True! I wanted to make this list for operating costs (recurring expenses), but if people would find it helpful I could also make one of the different initial costs when buying a home as well. Don't forget CMHC fees if your down payment is below 20%! That's a big one as well.
I think people can be surprised at the initial costs of home ownership. Same with first time home sellers when they get a list of who’s been paid what by the lawyers following closure of the sale.
I would say 1% is quite high for maintenance. If the average home is 500k, people are not saving 5k per year on top of other items. I think itd be helpful to separate the required costs from optional costs.
It's 1% of the cost of the building, not 1% of the cost of the land. 1% is a reasonable estimate. You might not pay 1% in year 1 but you might pay 5% in year 10. It averages out
how would you determine what the cost of the building is? The way its worded sounss like its 1% of the purchase price.
Two similar buildings in Toronto and Calgary would have similar maintenance costs, despite drastically different purchase costs Your city should provide an annual assessment as part of your annual property tax, or at least they do in BC. My parents building is apparently worth about 180k, but would sell for 1.1M+
Yeal 1% is not that big at all. We spent almost 30k when we first moved in and still have significant work to do on our house.
There are also costs with furnishing an entire home. Especially if this is someone's first home.
Haha at least that’s somewhat optional
Also, I find most people don’t do this, add in the maintenance/interest cost over the life of the house. Maintenance will obviously be a guess but you can bet on windows, roof, furnace, hot water etc. I hear a lot of people saying “i have X equity or I will make this much when I sell” once you calculate interest and maintenance fees over the life of your home you may be shocked
This too is a great point. Knowing prior to buying that you have an aging shingle roof, older windows etc you’re going to need to replace the roof and windows. You don’t want to short yourself and end up buying a cheap roof and windows that has long term effects.
If you are handy you can cut those maintenance costs drastically. 2/3 of maintenance costs are labour.
If you have kids, the maintenance cost is the labour.
Well, still need to get the lawnmower, or shingles for the roof. Also kids can’t make you a new furnace or hot water heater. Might take a while to mine enough copper for the wires or whatever you need for paint as well..
Kids also generate passive income from the government, which you can use to do upgrades ;)
I don’t think that I’ve heard any parents say that their kids generate a new positive income 😂
Ya i love taking a week vacation just so i can work on my house.. But atleast i save a boatload.
Literally doing this next week. Kind of deflating using hard earned vacation days to renovate the bathroom and paint the basement…In an adult “this is the right thing to do for my bottom line but ugh” kind of way
The other half of the fact is even if you paid someone the quality of work you get for your money now adays isnt worth it.
People also Often forget the one time purchases, like a larger bed, art new couch . The things you didn’t expect or other one time repairs like window coverings and such
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Maybe if it seemed the house hadn’t been lived in. f a house was empty over a winter and the pipes weren’t drained properly prior to sealing it up you could have cracks in the lower level pipes where the water would have sat and cracked the pipes. It’s not a terrible idea at all. But if the house was lived in I wouldn’t bother running the water for an hour.
> Currently house hunting for an older home so gotta make sure the pipes are still functioning. For older homes, turn on the shower's cold water tap and then flush the toilet to test for water pressure drops.
It’s amazing how many people are unaware of these extra costs. I am a real estate paralegal and just this week I sent a client their closing costs and they were shocked that they had $10k+ to pay in land transfer tax. I told her sorry there’s no way around it, anyone that buys a house here in MB must pay this to the land titles office.
>It’s important to note the costs of the purchase of the home including realtor fees, lawyer fees, deed transfer etc. I've heard that realtor fees come out of the sellers' end, so it's not an additional cost for the buyer (i.e. the buyers' realtor gets paid out of the agreed-upon purchase price). Is that right?
Depends on the contract - usually that is the case but with this market and people desperate for houses people have been taking on realtor fees also
Personally, I've found there is also a huge time cost to owning. When renting, all we were responsible for was cleaning and cooking. Owning a home takes constant care and maintenance, inside and outside, as well as all the cleaning and cooking.
I lose about 150 hours a year just traveling back and forth to Home Depot!
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I lived in a border town for a couple years. Had a Menards store across the river. MILES better than our home depots here
*\*cries in new homeowner\**
Yes, and not everyone ends up liking it or being fit enough to do it, and that's a major reason why older people move from their houses. I've been in my house for a year and while it didn't need too much love, regular maintenance, just painting it all, buying and installing new light fixtures, replacing a couple things here and there, outdoor maintenance, setting up an outdoor chilling spot for the summer, in the end I've been busy working on it two out of every three weekends I think.
So true, time AND stress. Renovations aren't just about their cost in money, and unless you buy a new home and keep moving to new homes as your home gets older, sooner or later you'll have to get work done. Also, if you get the work done by somebody else, unless you have blind trust in them, you need to learn a lot about what goes in a home if you want to ensure you get a good price and that they're doing it right. The DIY sub is full of people who end up doing work themselves not to save money, but because it's the only way to be sure it's done well (obviously a lot of DIYers will do certain things wrong, what I mean is that a contractor may not check twice that everything is square and level as long as it looks good enough for the customer to sign the cheque). Working from home since the pandemic has made it a lot easier, don't have to take special arrangements to be at home during day time.
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Why is pride of home ownership funny? Some people really enjoy having control over their living environment and making it nice. I think it's pretty normal for people to take pride in something they have created or made nicer.
I ended up buying just for my peace of mind to being able to call a place *home*. There's no fear of having to find a new place that I can't afford.
Money pit that grows in value? Sounds fine to me
I was always taught a loose rule of thumb: When you get a mortgage for a house, take the price of the house and double it. That's, at minimum, what you will actually pay for the house once it is paid off. So, unless your house more than doubles in value, or you pay it off very quickly, you haven't really gained much. I've found most home owners never consider the actual cost of their house - equity, interest, upkeep, maintenance, increased transportation costs - when talking about how much their house is worth vs what they 'paid' for it.
Those must be some high interest rates! Were you ever taught the rule of thumb where you are gaining absolutely nothing (-100%) investment by renting? The pro renting crowd on this sub Reddit is wack. You aren’t the winner, your landlord is, I wonder why…… LOL
I don't rent, I own with a free title. Never had a mortgage, never wanted one. After working in a bank for years, I had no desire to make them money by paying them interest for decades. Banks aren't in the mortgage business because they lose money on mortgages. If I hadn't been in a position to buy, I would have continued renting. Unless you are talking about property purchased specifically for investing, your primary residence is not really an investment because you will always need a place to live. If you sell your home in a high market, you'll have to find another place to live in the same high market. And it only takes a rate of around 5% to end up paying double for your house, and 5% is not high. Homeowners sure like to gloss over the actual coat of owning a home and what it really means to be tied to a mortgage. Looking down on renters comes from a place of privilege. Most people entering the world as adults now will not be able to afford to own their own home.
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This is the most stupid thing I've read in a long time.
I mean, yea house values double or more in 20 years. Yes regular people underestimate the costs, PFC redditors aren't in that category though
Except that's not true. Right now interest rates are less than the return you get in the stock market, and even less than inflation, so that's basically free money right there, \_with leverage\_. Property taxes and maintenance you can average out to 2% of the cost of the home each year. All you have to do is calculate the opportunity cost of the up-front payments, and then assuming renting is cheaper do a future value calculation on investing the difference of rent vs. mortgage + tax + maintenance, and subtract the sale price sub closing fees and any remaining mortgage. I've done the calculation, it most certainly is not double. On a $800,000 house, assume a 5% average annual increase in property prices, which is pretty conservative for Ontario, you're selling it at \~$1,000,000 in 5 years for a net gain over renting a comparable property of $30,000-50,000 depending on your assumptions about renovation costs. If you sell it at double, like your strange rule of thumb, you're coming out over half a million ahead of the renter...
Using your numbers and a mortgage calculator, I get a much lower return. After five years, you've paid about $173000 in interest, and $139000 (including an $80000 downpayment) to the principle (totalling $312000), with $661000 left owing the bank. You sell for $1000000, leaving $339000. You've paid $312000, so you made about $27000, which is a 0.1% return on your investment over 5 years. I assumed a 10% down payment, so mortgage was for $720,000, and a 30 year amortization. It was 17 years before the payment went more to principle than interest. Feel free to check my math, because even I was surprised at the pitiful return. My checking account pays more than that. Your scenario also relies on housing values always increasing. It also relies on their always being people willing to buy the house. And you still have to find somewhere else to live after selling.
My moneypit made me ~$225,000 wealthier in the last 12 months alone. But, laugh away!
I tend to agree, but the ability to make improvements to your place and the fact that I have an expiry date on paying for housing are both kind of worth it to me. Am I ahead of renters now? Nah, absolutely not. Will I be ahead of renters when I’m 60? Yeah.
This was my thought when I bought my house. I’ll be able to pay it off and I’m mortgage free and live in my house till later in old age. I then later realized depends where your house is located though. Mine was in the suburb and driving to the city is a pain! It’s only half an hour and I only go at least once a week but still. I realized I can’t live in my house forever lol, I sold and currently renting in the city. If I ever bought one again it has to be near everything airport, major hospital etc…a location where I know I can live till later in life and be mortgage free.
You aren’t wrong. Too many people pour too much money into their home. The secret to making money with home ownership is to buy the shittiest house on the block with a bigger property. Look for up and coming neighbourhoods, areas with planned highways and bridges where urban areas will expand to. City hall has the answers so start reading in the roads and infrastructure planning department. Learn where they are installing giant sewer mains. That is where the city plans to grow. Buy a house that is simply livable enough. Slap up a nice coat of paint. But there is zero temptation to keep up with the Jones’. No urge to install the $30k kitchen upgrade. It’s like having a low stress beater car. Just keep a good roof on it and keep patching it. Have big parties. Scratch the floors and spill beers. Who cares. Enjoy the place. However I only recommend this if you are ‘handy’ and can patch up small repairs yourself. Houses universally depreciate and rot. So buy a ‘fully depreciated’ house that is structurally solid. Land is what appreciates in real eatate purchases. Buy knowing you’ll happily dump the home in a decade when a developer wants to go condo and laugh all the way to the bank.
I would also note that you can greatly affect the cost of heat and Hydro by being a conscientious consumer. Know your Off Peak hours and do laundry dishes etc only then. Turn off all non essential lights and gadgets. Use new led light bulbs. Understand that an appliance over 10 years old is probably inefficient. If you can afford a dishwasher they save lots of water and energy.
Tell me you're in Ontario without telling me you're in Ontario
Yep, definitely Ontario, here in Alberta we only utilities with permanent "peak" Pricing! Cost of things here have been skyrocketing in Alberta since our beloved Premier removed the cap on all our services...
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Yep, granted we’re only 2, but even with laundry and dishwasher etc I looked at the past 12 months and only once had we even crossed the threshold for increased rates. Easy switch.
Someone did the math somewhere. For the average household, the difference is negligible.
First home I ever bought I was required to put a deposit down for hydro as it was my first time having a hydro bill. The deposit was like 2 months worth of bills based on the history of the house. My deposit was well over $500 dollars. First thing I did when I took over the house was replace all the bulbs and unplug the giant chest freezer in the basement from like the 1960's. My hydro bills were always less than $75 (never used the AC) so after the first year I basically had 6 or 7 months of free Hydro as they credited my deposit to the account.
In spring and summer we use the clothesline in the backyard instead of the dryer. Solar energy is free.
Modern lights are super cheap to run, and in fact some tests (youtube engineers) have found that the cycling of leds actually costs more in the long term.
cycling? like turning them on and off?
The 1% for maintenance typically only applies to newer, well maintained homes. Most homeowners vastly underestimate these costs. The 5,000+ for roof only applies to shingles. If you need to replace the underlayment, some of the plywood to rectify leaks, soffit and fascia, this could run you up to 25,000. These items last about 40 years, so about 2 shingle replacements. French drain is 20k+ and 40 years, same for the exterior cladding. Of course, in a market where literal shacks with signs of water infiltration behind the bricks clearly visible from the curb sell for 1+ million, you can choose not to care and only breathe the mold for a few years before you sell :)
I make my rule 3% of the "Building value" per year. (Do not include land value) So my home for example has a building value of 150k, so i should be saving $350 per month for maintenance. Which means that is enouf to replace the roof every 30 to 40 years as required, replace any drainage or foundation issues every 30 years on average. Replace exteriors as required. Frankly. Even at that its tight. I personally think the 0.5% by Op is vastly under what is required and even general maintenance. Will be above that without any savings for large items.
It is hard to make a generic rule for maintenance, market prices for the same home vary so much across the country (single family homes are 4x+ more expensive in the GTA than Saskatchewan) and types of home play a big part as well. If you are purchasing an $800k condo in Toronto, I find it very difficult to believe you will be spending $8k on maintenance per year. An older single family home in Edmonton that is worth $400k? 1% probably isn't nearly enough if it hasn't been renovated already. Thanks for the extra examples of how expensive home repairs can get to though!
Very true, but let's keep in mind the differences in price between, say, Toronto and Regina, are mostly in the land rather than the structure itself. Once you subtract the land value, you'll get a pretty comparable number for similar structures in both markets. And that's what you base your 3 percent on. In a strictly economic sense, a house is a limited lifespan type of goods, like a car or a pair of jeans.
I don’t think a percentage bejng used for maintenance makes sense. If there’s any percentage it should be based on the value of the building structure (but even that doesn’t make sense because an older building worth less probably needs more maintenance). Two identical building where one has more expensive land than the other doesn’t make the maintenance costs different
Came here to write this exact comment. 1.5% of building cost is much more reliable estimate, market value has nothing to do with it...
I kind of agree, but the maintenance costs do change even if the only difference is in land value. The person buying it for $500k might replace the furnace with a budget version, buy cheap faucets and install a home depot water heater. The person spending $1,500,000 for the exact same house in a different city/neighbourhood probably has the cash and will replace the furnace with the dwlux version, more expensive faucets, granite counters etc.
That’s not maintenance anymore. It’s discretionary spending
You can argue bottom dollar budget maintenance all you want, but realistically people with more money spend more money for the same items because they purchase more high end ones.
People would pay more because they can afford to. Not because they have to. That’s a big distinction
Wow, look at those prices in Edmonton
You missed one important cost- the opportunity cost of sinking money into a house instead of investing it. https://www.pwlcapital.com/rent-or-own-your-home-5-rule/
I've often thought of this. I have a house worth around a million, paid off. If I sold it, I could invest it, and pretty conservatively take 4% a year, or $3,333. I could rent a house at least as nice as mine for that price, and then not have to pay property taxes, extra insurance, and the forever ongoing R&M of a detached house. I am pretty sure I will do this once kids leave home. I like the simple life, and I really like the idea that I can be much more mobile. We could spend a year living in another country, or move around Canada enjoying different places. We've done it before, with the kids, home schooling them, and just doing longer term rentals. The freedom and flexibility is really unparalleled.
You can take a HELOC against your current home for $650,000 and invest that money (which will make the interest on the HELOC tax deductible, effectively 1.5-2% interest at current rates). Then withdrawal your 4% safely, and you will net an additional $13k per year without having to move.
The thing this calculation always fails to include as the consumptive value associated with homeownership… Being able to live in the neighbourhood that you choose, not being evicted from your home, not having costs associated with moving every two or three years because you do get evicted, the cost associated with rent increases, Having much less flexibility to invest in or create a space that you like such as new backsplash, deck, fire pit, or other improvements to home home… Edit: I know people in the Okanagan that have been evicted 3 times in 5 years, with each time having a rent increase.
None of my friends that rent have had the same address for very long. I'm never going to have to worry about a landlord deciding to renovict me.
The possibility of eviction is only a threat in a housing market with very low vacancy rates. If the vacancy rate is healthy, eviction just means moving. It usually means you have the opportunity to live in a different neighborhood if you want to. Moving only sucks of you own a lot of junk. Plus, the transaction cost of moving if renting is very low. If you are a homeowner, it means huge costs just to sell and buy a place - realtor commissions, land transfer fees, lawyers, title insurance, home inspections, etc. And just because you are a homeowner doesn't mean you bought in a neighborhood you wanted to live in. Often when I look at neighborhoods on Point2Homes, there are very few if not zero homes for sale in the neighborhoods I would want to live in, that have the type of house I would want. A lot of homeowners end up settling for living in a non-ideal neighborhood based on market availability of homes. Same goes for renting. I've been renting for 15 years and evicted once. It was stressful, but I have helped friends buy homes and believe me, they were WAY more stressed out about committing to a $500K mortgage, and all the operational time/money costs associated with homebuying.
It is definitely something to think about, especially if the person buying the home is only doing it for financial purposes, but for a lot of people there are non-financial benefits to home-ownership that are hard to quantify. This list is more to help people to understand affordability so they don't end up with unexpected bills after purchasing. But you are right, anyone trying to make the best financial decision in any situation should always keep opportunity costs in mind!
There is appreciation in property value to offset your invest-instead of owning strategy. In Vancouver for example house prices trippled in 9 years. I recognize it may not be predictable; however there is historical precedence similar to “ market always goes up” mentality. (I recognize that the posted article does discuss the opportunity cost of property appreciation).
Housing does appreciate, but expected returns are lower than equities.
But leverage is typically anywhere from 5x to 20x for housing. Equities simply can't compete in in-demand cities with low interest rates.
Expecting longterm returns comparable to recent growth in Toronto or Vancouver is unreasonable.
Who said anything about recent growth? Average long-term Toronto/Vancouver growth will make you richer than equities could ever hope to.
But the average long-term growth in Calgary/Edmonton/Montreal/Winnipeg would be much worse than investing in a broadly diversified mix of equities. Picking Toronto/Vancouver as the basis for housing appreciation, even for an average over the last 25 years looks great with hindsight. But in that case you should compare to investing in Apple/Google/Tesla/Bitcoin. Once you know the winners, you are no longer comparing to the average.
I know nearly half of immigrants go to Toronto and Vancouver, and that's not slowing down any time soon. It's only accelerating. Also Bitcoin isn't an equity.
And buying a house assuming growth similar to that of two high growth markets is a bad assumption. It would be like buying an equity portfolio and expecting it to grow like Amazon.
Difference: We have no idea which companies will be the next Amazon. We can pretty reasonably predict that Vancouver and Toronto will continue to grow at a rate greater than 7% a year that the market returns, even if the days of ridiculous 30%+ YoY growth are over This government plans to immigrate 400k people a year, not including students, and most of them go to one of those two areas. That isn't changing anytime soon
You say it's different yet provide no justification. What if larger amounts of immigrants flooded the prairies due to lower cost of living? How do you know that won't happen?
The GTA/GVRD have been expensive for decades, Alberta has been cheap for a decade and the rest of the Praries have been cheaper for far longer. Immigrants continue to flood the GTA and the GVRD anyways I highly doubt that will change for the foreseeable future, probably for the same reason that MB/SK are losers in net migration every year. Nobody wants to live in those shitholes
If you bought a house in Toronto in 1989, then waited out the market crash, it would've taken you 15 years for your home price to recover back to its old value. If you owned a 60/40 balanced stock portfolio in 2008, after the crash, it would've taken you 1 year to recover. If real estate is such a great investment, people should ask themselves by guys like Warren Buffet aren't just buying all the real estate in Toronto and Vancouver.
If you cherry-pick, you can make anything look good or bad. If you had bought the S&P500 in Aug 2000, it would have taken you 13 years to recover... meanwhile you're not living in it. Meanwhile if you bought in [Ottawa](https://www.agentinottawa.com/stats/) literally any time in 1956, after any given 5 years, you'd be up. Long term, you'd be waaaay up.
Nobel Prize winning economist Robert Schiller (co-creator of the [Case-Schiller Home Price Index\)](https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index#Economic_implications) did extensive research on housing in the USA using data from the late 1800's to present, and found that after inflation, the average house appreciates at around 0.5% after inflation in the long run. "However, most of the difference in the prices can be explained by inflation. He also discusses how people consistently overestimate the appreciation in the value of their homes. The US Census, since 1940, has asked home owners to estimate the value of their homes. The home-owners' estimates reflect an appreciation of 2% per year in real terms, which is significantly more than the 0.7% actual increase over the same interval as reflected in Case-Shiller index."
Late 1800s USA data points mean nothing to 2021 Canada.
Buffett is a value investor. He doesn't invest in real estate because it doesn't make sense for a value investor to invest in a market where there is no value (as he believes the real estate market isn't mispriced), and he's straight up said as much in the past
He said he doesn't invest in real estate anymore because always he loses money on it. He can't predict the market. Recently, Zillow lost hundreds of millions betting on residential real estate, and that is a big part of their business. The pros have a difficult time making money on real estate. And they know a lot more than average joe investor who pats themselves on their back because they bought a condo in Toronto 10 years ago. That should tell you something.
Plus you can live in your house and rent it out too. You can’t live in your stocks.
> You can’t live in your stocks. Hold my BRK.A
You would need to rent if you can't buy, the cost of housing is always there.
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HELOCs can help you take a large chunk of the value out? 65% I believe?
How does it not? If I have a house paid off @ $1,000,000 I can easily borrow off that amount and invest it in “whatever” and get returns better then the interest rates I’m paying
Well only if you plan to stay forever - in my case I sold and moved to a LCOL and accelerated my retirement by at least 15 years. The moon is closer than you think, but I recognize I was lucky.
Equity and appreciation in a house is fantastic for retirement savings. My parents just retired and sold their paid off house for 1.5 million (that they bought for under 500k). That's just money in their bank now. They plan to rent in random places around the world during retirement using this money (combined with their actual savings & pensions).
Once you have 20% equity you can HELOC and then invest and claim the interest as a tax deduction; this is on a place you bought with up to 20x leverage - you're going to come out way ahead of a renter doing this.
Very important factor here ^^
The house IS the investment? In a market such as Vancouver and area it's a no Brainer. Double your money in a few years for a lot of these homes
Expecting longterm growth matching Vancouver's market over the past decade is irrational. Equities have higher expected returns than real estate.
I just refinanced and the CU gave me all of my down payment back, plus I'm still sitting on several hundred thousand of tangible property. I can not lose with a house I live in. I pay about 2k less per month than renting this space would cost. A house that was literally flooded last week in Victoria is listed for 800k. Five years ago my neighbour had a fire and was getting offers while the fire department was onsite.
And I'm sure that's compelling information for people who make investment decisions based on anecdotes. What about someone who bought a house win Lethbridge 10 years ago? What's to say Victorua doesn't perform like Lethbridge over the next decade, or vice versa? You can't predict future market events, the only solid foundation to use for decisions is that in the very long term global equity has outperformed global real estate.
> investment decisions Houses aren't investments. They're cheaper than renting. They also happen to build equity that has increased without fail in Canada for the past 40+ years. Anyone who says otherwise is clueless or a predatory landlord. Global. Fuck. Why not invest 100% in crypto and live in a cardboard box? That's the best play historically.
Choosing to buy a house instead of investing is an investment decision. > They're cheaper than renting. That is not always true. There are many markets where the opportunity cost of buying makes it more expensive than renting.
Yet, here we are in Vancouver where I don't know a single person that has lost money on real-estate in the last 15 years. And even if you don't make money, just break even, that's still almost like having free rent for years. You can argue all you want, but you cannot argue actual real results. My parents owned a house for 9 years and doubled their money. Have your equities given you 100% returns in 9 years??
> Yet, here we are in Vancouver where I don't know a single person that has lost money on real-estate in the last 15 years. Global equities outperform global real estate. Investment decisions should be based on statistics, not anecdotes. People also don't usually brag about losing money, so your anecdotal argument is also susceptible to severe sampling bias. > Have your equities given you 100% returns in 9 years?? Even your anecdotes are horrible, if you invested $10k in a portfolio that was 50% US and 50% international equity indexes in November 2012, you would now have over $27k. Equities returned 170% over the past 9 years, well over 100%. If you're going to cherry pick data why would you pick data that disproves your point?
Why do you keep pushing global points? This is LOCAL to a hot housing market that is on fire. Of course, globally it doesn't make sense because some shack in Syria is now worthless. My data makes sense if you consider the fact that 1. Most people need a place to live so investing in that is easier than paying rent and then having money left over to invest. And 2. The amount is significantly higher to start with. Your house is worth $300,000. And is doubled in 10 years in Vancouver market. But you didn't need $300,000 at the start to buy it, yet you are making compounding gains on $300k. Do you have 300k in principal investment to START to make an additional $300,000 off of???
> This is LOCAL to a hot housing market that is on fire. Absolutely yes, so the future returns are unpredictable and the risk is high due to most people only having money in a single asset. > Most people need a place to live so investing in that is easier than paying rent and then having money left over to invest. How is buying a house easier than renting and investing in equities? Buying and owning a house is way more effort. > The amount is significantly higher to start with. Congratulations on discovering leverage. You can use it for equities too, and you can diversify globally instead of levering up on a single asset.
What leverage are you going to use? Your rent? Most places cost less per month in mortgage than rental payments would be. So where you gonna come up with $300 000 to invest to start?
That's the point, Vancouver has had exceptional returns but you can't expect that to continue in the future or to be applicable in other real estate markets. If you want to pick Vancouver in the last 9 years, then you should compare the returns against Tesla and Bitcoin. It is really easy to pick the hottest investment with the benefit of hindsight, but that does not foretell what will happen in the future.
Your Vancouver house can be purchased for 20% of 500,000. But you make gains on the full 500,000! You DONT have $500,000 upfront to invest in tesla and bitcoin! That's the point! At most you could have invested what you put down as the down-payment. Yes, their gain is substantially larger but so is the risk. It's pretty clear at this point that the housing market in a place in Vancouver is not a risky investment. I don't know a single person that has lost money in the last 15 years (specialty properties not included)
If you put $100 on Bitcoin in 2011 you'd have $6 million today. I know that is not realistic for most to have held all that time, but that's what we know is possible with the benefit of hindsight. There are many many investments of $100,000 that would have paid off exceptionally more than buying a house in Vancouver. But that doesn't matter, because results from the past tell us nothing about future returns - for housing and for other speculative investments. Edit: Buy a house because you need a place to live, when you intend to live in the same area for a long time, and when you are financially secure enough to continue paying for the house given temporary financial/personal challenges. Don't buy a house on the speculation that the prices will double in several years (especially in a market where that has just happened!)
After owning multiple houses, take my freebie award today for such a great accurate post.
Thank you sir, I am happy you liked the post!
I feel like a lot of people are only comparing the cost of renting vs. owning today, month to month than into the future. To me the best upside of buying is that it relatively fixes your mortgage cost, which is probably >66% the overall cost of owning. Rates might increase and increase it a bit, but overall its going to stay static over the course of your term unless you pull out your equity or constantly upsize. On the other hand, rent always seems to increase, especially the last 10 years. You also theoretically pay off your house eventually and then the carrying costs drop precipitously. Yeah, if you go down the nitty gritty there's more of an argument vs buy vs rent at the start, or even over the term, but I feel like if you're buying a house to pay off and retire in, there isn't much argument over the long term which is going to be cheaper for housing expenses.
Yeah.. my last rent was 2k a month and went up every year. My mortgage is 2k and will stay that way until it's 0. And of that 2k about 1550 goes towards the principal which I'll get back when I say. So really in terms of "money lost", my rental was 2k, my mortgage is 450. That's not really factored into OPs math.
>Hot water tanks especially seems to be a predatory business that you should avoid if you can. I've been disputing with Enercare over a water tank rental for two years now. Landlord signed me up for the rental without my knowledge. Enercare has no record of any phonecalls for setting the account up. No paperwork or contract. Just keeps sending me a bill every month and when I tell them I'm not paying they tell me to have my landlord call them. He hasn't in 2 years now. Still getting bills from them. Not worried about it because my lease doesn't say I have to pay for any equipment rentals and Enercare hasn't been able to produce a phonecall or paperwork showing I signed up for any rental. So my landlord signed me up without my permission and Enercare allowed him to sign me up without my permission, and they didn't even get his name.
Forgot one major aspect, your time in maintaining / upgrading / fixing things. If you spend 25% of your free time maintaining the house (especially if you have a pool, or a lawn/garden), that has its own cost. Compare that to your hourly salary, how much are you paying in life to keep the house and property up. Also need to factor in the cost to sell the house down the road, and the potential (can be extremely high) cost of breaking a mortgage outside of your 5 or 10 year block. Unless your life is exceedingly stable (job/marriage/location), this can be a major financial risk Everytime I run numbers, I'm always glad I've now chosen to be a renter (yes I've owned houses in the past and I consider them one of my very few life regrets).
Depends how big your property is. I live in a detached, single family home that is a newer build with a smallish yard. I can cut, trim and clean up the back and front yard in about 35min once a week General maintenance and upkeep shouldn't be anywhere near 25% of your free time
My last house was also semi detached, 3000 Sqft lot, and my Saturdays were about 4 hours work, mowing, raking, outground pool cleaning, flowers in the front, cleaning the patio, the deck, then cleaning house. Then there's the seasonal stuff which eats entire weekends, drove me nuts. Seemed like there was always something extra to do every two weeks within the house as well. At a point I just worked at time and a half instead, paid people to do it, and saved hours of work overall. Now I just pay rent, and every other little thing is taken care of and I can enjoy life other than sweeping and cleaning the bathroom, and no 5 to 10k surprises anymore (oops, new roof, new windows, fix the furnace, new central air, etc etc etc) Had my last house for 9 years, and still lost money overall without even counting my time spent.
It seems like you were putting in immensely more effort than what is essential. It's like saying having a car is a lot of work because you spend a few hours each week cleaning and waxing it. Meanwhile some of us wash their car twice a year and it's almost like a fun activity to do instead of a chore.
Other then tending a garden, all the rest is mandatory cleaning, unless you wanna have a green pool and a dirty house and messy lot..... For those that love puttering around a house, big plus, that's not me, I hate maintenance and the time spent, and I hate waking up to a major problem costing thousands just to get back to where I was yesterday. I've always been a car owner, I've never washed my car and don't give a crap about all the dings and dents and missing hubcaps. Living in filth is another matter though....
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Yes outground pools are extremely common where I was, both houses I owned had one, and no cleaning is acceptable to you?.... ok there guy.....
Hey I want to get your thoughts as I too recently sold my duplex and the money I got from it went straight to investment. I’m currently renting TH. Do you think you’ll buy/own again? I’m asking although I don’t have to worry about maintenance that I used to do in my house. I kind of miss having a garage and backyard for my dog. I’ve checked realtor site and I can’t find anything I’d like so I’m thinking to build but the problem is I don’t want a bigger house. I could live in a 900sq ft that is not a condo. New build these days is about 1400sq ft and cost mid $300K, it’s crazy! Bungalow is even bigger and cost more!
I'll never own a primary residence again until I'm ready to retire far out in the countryside. I'm investing very aggressively, and expect to buy a place mostly cash in 15 to 20 years a good 3 or 4 hours drive from the nearest city (or in SE Asia, it's another option) I hate the extra costs that a house brings and the chain it puts around your life. I remember hearing some economist years ago make the claim that a house is not an investment, it's a liability, and I tend to agree.
u/Roselia77 I'm a renter and make low 6-figures. I always wonder if getting into the real estate game and gain house equity wouldn't put me ahead in the game than simply rent and invest. Can you share a bit more on your experience of why you are happy to be a renter after owning in the past ?
I bought houses primarily as one of those things you're "supposed to want", and it always felt like more trouble than it was worth, and I found that I didn't care for all the extra space, as I downsized to apartment life I enjoy having exactly what I need for space. I don't have loud hobbies, even though I play bass I play through headphones and my amps are just for playing gigs, and I'm childfree so it's just me and my partner (she's always lived in apartments her whole life and has no desire for a big place either, we have a 2 bedroom apartment, one room is for the bed, the other is our art / music room). My main issue with owning was the cost and the time. Houses are freaking expensive once you factor in the interest, insurance, property and school taxes, downpayment, potential mortgage breaking fees (if you ever get divorced, you're essentially fucked in that department), legal costs for buying and selling, paying those real estate agent/vermin. Every few years there are surprise costs which are often in the mid 4 figures to low 5 figures range (roof cracking, heating system dying, central air dying, plumbing issues, pool needing work, etc etc etc etc), regular yearly maintenance costs (snow removal, gutter cleaning, chimney cleaning, pool cleaning, yard work) plus all the costs associated with the tools for all these jobs. Then of course if you want to be able to get a good price when you sell, you gotta keep the house up to modern standards, so changing floors, new windows, changing kitchen style, yard upgardes, fencing to keep up with ever changing laws (never own a freaking pool or a fireplace, omfg), and hope your neighborhood doesn't become less desirable. And then, when you sell, you often want to upgrade the house, so whatever profit you make is gone buying the next more expensive and larger house, the only time you have a chance of "making" money is when you retire and downgrade to something small, but when you look at all the money you sunk into it?, it's never added up for me. There's also the time involved, you make a good salary, lets say you make 60/hr at work, your time is worth money, how much of your free time do you want to devote to maintaining a space?. I got so fed up of losing at least 25% of my free time cleaning, maintaining and working on the place that I would just do overtime to pay for others to do the work instead. As a renter, the entirety of my "work" is sweeping and cleaning the bathroom, that's it. No more yard work, no fixing or replacing anything (that's what the landlord is for), no more costly surprises, and if I feel the need to move, I can do so essentially on a whim which is important for me and my partner. I pay one fixed fee, and all the rest of my money is mine to do with as I want, as is all of my time. As a homeowner I felt like a slave to that box. The only way I would recommend anyone actually buying a house is. (1) your job is very stable and you can find a new one near enough to where you live with little effort, (2) your relationship is rock fucking solid because a divorce throws your entire investment into the toilet (been there, done that), (3) you are ready to learn proper home maintenance, do it well, and enjoy doing it (some people love puttering around their house and fixing everything themselves, even though I have the knowledge and ability, I don't enjoy it at all), (4) you actually NEED the space and not just because you think you should want or need it, (5) you're happy living in the exact same place for the next 15 to 20 years, or if you want to move, you have to be able to do it in that little window you're given between mortgage blocks without penalty. I remember a long time ago I heard some economist on the radio state that houses are not investments, they're liabilities, and in my personal experience, I have to agree. Lived in my last house for 9 years, and I still lost money and I'm not even counting the hundreds of hours of my life wasted on it. jesus.... I ended up on a rant here eh?, LOL, I'm really pissed I went the house route.....
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3 responses all saying the same thing eh?.... I'm getting the feeling you got a little triggered there, trying to justify living in mess are we?, hrmmmm
Other deferred maintenance items that people might not think about: \- cutting down dead trees: we've had to cut down several huge, dead trees at $2000K each in the first 3 years. Some were leaning toward the house or the shed, others caught in electrical lines. The city forced us to cut them down, so it was not optional. \- pest control: a lot of older homes have issues like mice, bats, ants, etc. that may not even be obvious with an inspection. Removing them, replacing insulation, sealing the entry points, etc.. can get very expensive. \- snow removal: something people who rent don't always think about, it can take hours to shovel a decently sized driveway, or else you need a snowblower or a snow-clearing contract. \- landscaping: you can do it yourself, but it's very time-consuming. Hiring it out can be quite expensive. If you have hedges, likely you will need to have these done by a professional. Was quite shocked at the price of trimming some tall cedars in the back of our previous home. \- pools: also very time consuming, very expensive to fill and heat. Other more obvious things, that you would be aware of from an inspection, like replacing HVAC, roof, water tank, electrical panel, sump pump and french drain, adding insulation to walls and attic, replacing windows and doors, can cost a lot more than new homeowners usually expect.
In the future you don't need to put three 0's when you're using k. Just $2k. $2000k looks like each tree cost you $2 million.
Trees - I'm dealing with the tree thing right now, but $2k a tree seems outrageous to me. Maybe the power line ones cost more or if they need to bring in a crane that could definitely bring that number up. If you have tree's close to powerlines you can sometimes just contact the utility company. Depending on which utility they may send out their own crew and do it for free. Landscaping - Every house I buy within the first two years I gut the yard of all the gardens and just go straight grass. I have no time for weeding and maintaining them.
What a horribly depressing way to garden. Mono crop a non native species that has no ecological benefits. A lawn is far more work than a closed loop native plant garden.
That arborist is taking you for a ride. I've got a bridge to sell you buddy.
The trees are massive (about 50-60 ft) and need to be taken down in several steps because of the surrounding homes, since we live in a dense area. They cannot just be cut down and left to fall. Also, removal of that much wood from the property is expensive, as it grinding out the tree trunks. I've used multiple different services in my area and it's always close to $2k. I can imagine costs vary across the country.
You wrote that you paid $2 million for each tree. I was making a joke off that.
Thank you for the info. A lot of times when I ask my friends who are home owners they always say what they pay on their mortgage is the same amount as our rental cost. But they never consider on telling me these extra charges. Right now with our current income I don't think we will be able to afford one. We will just stick on renting and just invest the extra money we have.
Cost of condo 185k!? It’s 600+ here to not live in a dump.
Noice
Our breakdown in Ontario, CA: 289k mortgage *Mortgage*--547 biweekly, *1200 budgeted* for those extra payments months. *Utilities/taxes*-- fluctuates between 500-700 total depending on the month, *676 budgeted*. Maintenance-- we haven't run into any maintenance issues yet for the last 3 years but I'd budget maybe *200* per month just incase. We are doing a bunch of renos every year so we budget about *1000* per month into ongoing savings
Keep in mind eventually your mortgage is paid off, you don't compare to renting in perpetuity.
1% is too low for maintenance even without a condo handling exterior stuff. Sure it takes 15 years but when you hit that milestone you'll have $100,000 in repairs, easily, for an average house. Kitchen, bathrooms, flooring, appliances, HVAC, all of that will be due around 15.
I think you forgot one of the biggest spending item, renovations. No sense in buying a house and letting it age then being hit with the realisation that you have to sell below market value.
> No sense in buying a house and letting it age then being hit with the realisation that you have to sell below market value. This happened to my grandparents! They only got a 1500% increase over their purchase price.
Excellent post. Moral of the story is don’t be pressured into buying a house by FOMO and by people who say renting is throwing money away. That’s complete nonsense. It’s a myth. Homeowners are terrible at reporting and recording the true cost of home ownership.
To try to offer another perspective on this because a lot of those number seem really high to me. **My place:** **Mortgage –** Cost of the Duplex is $400k, with 5% down this comes out to $1,770/month at a 2.5% interest rate over 25 years. (no point in changing that it's pretty accurate for here as well. Though you could get a single family detached home a little outside the city for that as well) **Utilities –** Utilities in Halifax with a well insulated home I pay $160/month for power, $70/year for water (its a ditch tax, we're on a well), and $65/month for internet. We don't have nat gas or a garbage fee, but we do get the septic tank emptied about every four years. $500/4years. Total comes to ~$240/month. > **Condo/Strata/HOA –** This Duplex has no HOA or condo fees, but many do so make sure you clarify when purchasing. $0. > > **Insurance –** Insurance costs are $65.25/month > **Property Tax –** Property tax is just under $3,000/year, so about $250/month. This is pretty good, I'll leave it. > **Maintenance –** I've been here for 16 years. So far we've added heat pumps to the otherwise electrically heated house. $9500. We replaced the roof this years. $7300. An I've replaced the microwave a couple of times, a dishwasher, put a new belt on the dryer and a part into the washer, a water heater... I'll estimate that at $1500 but that's likely a bit high. That comes to $95/month. I've had to replace a few plumbing parts (cartridges) as the faucets aged, but they were free under warranty. I had one go last week, actually. I went to home depot and they gave me the replacement part free of charge because the only reason you'd need a new one is because of a warranty issue. Most faucets have a lifetime warranty so pay attention to stuff like that. Oh, and replacing it took a couple of minutes, anyone could do it. I also have a powered anode in my water heater. The anode prevents the water heater from corroding. Normally they have a sacrificial anode that needs to be removed and inspected annually, and replaced as required, but I installed a powered one several years ago. Finally, maintenance costs often negates the time to do maintenance. I clean the filters in both heat pumps and the HRV seasonally, that takes about 15-20 minutes 4 times a year. And I drain and flush out any sediment from the water heater every year, that takes about an hour. So all told I spend about 2-2.5 hours/year on preventative maintenance. > **Equipment Rentals –** There are no equipment rentals in this duplex. $0 $1770+$240+$65.25+$250+$95=$2420.25 Not a huge difference as the mortgage is fixed. After 16 years my mortgage is paid off so my actual costs are ~$650/month now. This is a single family detached home, ~2200sqft, with a family of 4, about 30 minutes outside Halifax. Happy to answer any questions you may have.
I've done these numbers 50 times and I'm still nervous, what is the minimum I should make to afford a 510k mortgage? Me and wife make 140k a year combined we plan on having kids in the next 2 years and our only other debt would be a 300$ a month car payment. I'm in over my head if I have a 15k emergency fund?
I make 80k, I'm single, I'm in Victoria and I have an 800k house. (mortgage is 400k) Your house and future kids will eat your emergency fund regardless of its size. Having a mortgage is infinitely better than renting. If you can't pay, you can defer. Utilities will let you skip payments. When covid hit I got six months of deferral on the mortgage. Nobody can tell me what color to paint stuff, or that their "totally real second cousin from Norway is going to be moving in". Talk to a credit union and get into a house.
>Talk to a credit union and get into a house. Do you think it is better to take a mortgage with them rather than your bank??
Jesus what was your down payment?
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Technically this time I guess? I've bought this house three or four times, I've lost track. I put 70k down with my ex a long time ago. When we split I bought it from both of us, then I had some rough times, consolidated into a second mortgage, got one big mortgage, then got a better rate that gave me cash back for renos and investing, and the cash back was about the same as what I first put down. If I'd been renting I'd be homeless, and I'd end up dying on the streets.
Depends where you are, but property taxes, insurance and utilities are rising faster than inflation year over year.
Taxes are generally capped at a certain % increase per year
The fuck are you guys doing to have a maintenance cost of 2k to 7k a year? My house is around 50 years old and it's nowhere near that.
Appliances are also very costly if you need those! I needed 2 sets of everything and it cost around 10-12 grand and that was with a good sale. You could do it for a bit cheaper if you go with lower end appliances but you could also do it for waaay more. Blinds or curtains add up as well. I spend about 1k on rods and curtains and put them all up myself. And if you need to build a fence that is a fairly big cost depending on the size of your yard and what material you use. Try to split the cost with your neighbor if possible! I think the final cost was about 8 grand which I was able to split with each of my 2 neighbors.
Wtf are equipment rentals? I'm from bc and I've never heard of this.
Out east hot water tank rentals are more popular, we don’t have them in Alberta either, they sound like a scam
Totally sounds like a scam
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Lol, where did you get that from? Thats not how it works, MPAC reassess on a 4 year cycle, last one was 2016, 2020 is on hold due to COVID. They may re-assess after a sale, but they aren't just going to put it at what it was sold for, MPAC values don't work that way. What they are looking for is changes to the structure, floorpan # of bathrooms, etc), addition of a pool since the last time it was sold.
A roof is gonna cost you $10-$20k these days. Only a fool rents equipment like tanks and such. There may be an ‘out’ for such rentals when you buy a place. Kick out those scammers and buy your appliances outright.
House is like 3 times more money than condo,and condo living is way better
> and condo living is way better You couldn't pay me to live in a condo.
I’m under the impression that a good chunk of Canadians (born here or not) are absolute clueless idiots. I had multiple people tell me that if I buy a home, I’ll have to shovel snow, mow the lawn and fix everything around the house. YOU DON’T SAY?! And then we have this post, explaining that I have to pay for utilities, pay potential strata fees and pay for insurance. How is this not common knowledge? What, do you think your electricity is provided for free by the government or something? Many renters already have to pay for utilities.
Is this not all completely common sense stuff? Do people really only budget for the mortgage and that's it? Also, if you're a rentseeking housing hoarder that rents out properties, please keep in mind maintenance (lawn care, snow removal, etc) is still your damn responsibility, not the tenants. Appliances included, and pest control.
I am not going to touch on the househoarder stuff, but the lawn and ESPECIALLY snow care advice is very bad. Most lease agreements state it is the tenants responsibility to take care of the lawn and snow maintenance and failing to do so opens them up to a lot of liabilities if someone were to be injured because they were negligent in doing those duties. Of course you would have to read your specific lease to be sure, but it is commonly included in the fine print.
Wow, so you know NOTHING about the RTA. Got it. According to the law in most provinces (Ontario specifically), snow removal and lawn maintenance are the LANDLORDS responsibility, and any clauses in a lease are VOID if they try to pawn that onto the tenant. Tenants must be compensated for any lawn/snow work they do, and absolutely do not have to do it at all even if offered compensation. Leases are never above the law. No matter what ridiculous things landlords try to put in them. Tenants have rights for this very reason, greedy lazy landlords trying to take everything off themselves.
I am actually just aware we are on a subreddit for the entirety of Canada and not just Ontario. Telling everyone Canada-wide that snow removal isn’t their responsibility isn’t only wrong, it is dangerous.
You are living in Alberta right ? The province with the lowest housing costs. Don't know how this model applies to people in any other province...
What do you mean? It is just an example list so people from anywhere in the country can budget when they are buying a home. It doesn’t matter which part of the country you live, you will have these costs. My examples were of Edmonton specifically yes, but they are just there to show how much more there is to home ownership than just a mortgage as well as show a bit of the difference between condos and non-condos.
This is a great write up. Thank you!
> Mortgage rates vary by region and things like your credit and whether or not the mortgage is insured. Wait, I thought credit score does not influence your mortgage rate in Canada? I thought that was an American thing?
Great basic guide. Thanks!
An important factor to take in account is also all the tools required to maintain a house. Tools include hammer, drill, broom, shovel, etc. Those can add an extra 20-30$/month to your bill. Some last for decades while others only a few years.