Buy or rent

Rent vs buy: weighing the pros and cons

Rent vs buy? Home ownership has long been considered a measure of success in life. But given the increasing cost of real estate in Metro Vancouver, the question of whether it makes sense to buy or continue to rent is top of mind for many.

The thought process usually goes something like this: Should I continue to shell out money to a landlord, or dig a hole for myself just to get a foot in the market? Am I prepared to give up the conveniences and lifestyle of living in an urban area to move to the suburbs where home ownership is more affordable?

It used to be a no-brainer. If you could, you bought to set up your financial future and secure your investment. However, today’s economic climate and lifestyle philosophy means that it’s no longer a cut and dry issue.

Here’s what you need to weigh for yourself:

Pros of buying

  • When you pay off your home, it’s yours. You eliminate the expense of housing once you’ve paid it off.
  • If the home appreciates more than you’ve paid in mortgage, interest, taxes, and maintenance over time, you’ve earned a return or break even.
  • Tax credits help offset some of the cost of ownership.

Pros of renting

  • You don’t pay any property taxes when you rent.
  • You don’t have to pay for repairs, maintenance, or other issues that come with home ownership.
  • You can often afford to live in what might be a more desirable area vs what you might afford if you were buying.

Here are some other things to consider when making the decision:

Personal finances. When it comes to purchasing a home, it is important to save a sizeable down payment to get the best possible mortgage loan from your bank or credit union of choice, and to look as attractive as possible to the seller. However, no matter how much you put down, you should avoid buying a house you can’t afford so you don’t end up “house poor.” You also need to remember things like property taxes and home repairs when putting together your budget.

When renting, your monthly payment includes all your home expenses, and while it may increase year over year, you don’t need to worry about unforeseen costs like a fridge repair or broken dishwasher. However, some argue that when renting, you are simply “throwing your money” away when it could be invested.

If you do decide to rent, it is important that you look into other ways of investing to secure your financial future.

Location & lifestyle (fear of social suicide!) A home is more than financial security – it’s about having a lifestyle that works for you. So it’s no surprise that more and more people are reluctant to compromise on location when buying a home, and this may trump buying entirely if there is no home available in their price range. With location driving their decision in increasingly expensive urban housing markets, people looking for housing are often choosing to rent in order to maintain a lifestyle preference.

The Emotional Factor. Ultimately, the decision to buy or rent is based on short-term plans, the inevitable changes to your lifestyle and how those fit with life and career goals. Buying a home has massive upfront costs that can only be justified by the long-term benefits and savings. If you’re young and aren’t at least 70% sure the area you are looking to buy in is somewhere you want to spend a good chunk of the rest of your days, it may be worth waiting.

Buying real estate has historically been seen as a solid investment with a high return. But for today’s young professionals it’s not that simple. Once the cost of repair, maintenance and other expenses are taken into account, the economic sacrifice may be just too much to justify. It may be hard for those of an older generation to get their head around, but by renting and then putting saved money into investments, it could mean higher returns in the long run and no location to be tied to.

On the other hand, a person could buy a condo in an outlying area, rent it out, and then rent for themselves closer to the city. This allows you to still be tied to the property market and you may one day want to move into the suburbs or you can sell and choose a new location to call home.

And now a note from our lawyers…

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.

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