Should you choose to buy or rent? What’s the best move for you?
The answer will be different for everyone but here are some things to consider:
Benefits of Owning:
1. Building Equity
A major benefit of owning is that you’re able to build equity in the home. Real estate in Vancouver has been continually appreciating so as your property increases in value, you will likely become financially stronger.
2. Moving with the Market
The opportunity to climb the real estate ladder is a benefit of owning that comes from the ability to build equity. Your initial investment moves with the market as a whole and you’re able to use that equity to move from your first home up the property ladder.
3. Potential for Rental Income
Buying a home with a rental suite is a great way to help with the mortgage payments and make the carrying costs of owning significantly more manageable.
4. Freedom to Customize
Everyone loves to turn a home into a home! When owning you can usually paint and customize flooring, cabinets and anything else to make your home reflective of your own style.
Obstacles of Owning:
1. Down Payments & Mortgage Qualification
The biggest obstacle to owning is providing a down payment and getting approved for a mortgage. Saving tens or even hundreds of thousands of dollars is not easy for most and so this can be a barrier to entering the market. Banks also have strict requirements for borrowers that may be an obstacle.
2. Carrying Costs
The carrying costs to owning a property will consist of repairs and maintenance, property taxes, insurance, mortgage payments and strata fees (if applicable). In most cases, these carrying costs make owning more expensive than renting.
Benefits of Renting
1. Cash for other Investments
Saving the initial investment of owning (down payment and other closing costs) will free up some cash to invest in other markets such a stocks…or NFTs? 😉
It’s also important to note that renting where you live may allow you to invest in real estate and rent that property to someone else. For example, we’ve seen some of our own clients who need a 3 bedroom to live but since they are unable to afford to purchase one, will rent a 3-bedroom and buy a 1 bedroom condo to rent out. This helps them enter the market and build equity even if they’re not yet able to afford their dream home yet.
2. Easy to Pick Up and Go
Assuming it’s a month-to-month tenancy, it is relatively easy to pick up and go. If you want to change location frequently due to your job or lifestyle, this may be an attractive option as opposed to having to go through the selling and buying process every time you need to relocate.
3. Cheaper Overall
In most cases, the monthly costs of renting will be cheaper than owning. This will allow some people to save more money before making the leap to purchase.
Disadvantages of Renting
1. Paying Someone Else’s Mortgage
This is the biggest disadvantage of renting. Your payments go to the landlord who covers some or most of the cost of owning. These days, rental prices are almost in-line with mortgage payments, so if you are able to get around the down payment and financing, it usually makes the most sense to own.
2. Less Stability
When renting, there is a bit less stability on where you live. For example, if the landlord decides to use the space for themselves, you may be given a two-month notice to vacate the premises (if renting month-to-month). This can be very inconvenient since relocating and moving within a short period of time can be stressful.
3. Increased Cost Over Time
The cost of renting will likely increase over time, year after year. The allowed rental increase for the year 2022 is 1.5%. Although not much, it does make a difference whereas with a fixed mortgage term, you’d have a set mortgage payment for the length of the term and it would not change.
There you have it; the pros and cons of both owning and renting! Still have some questions? Give us a call, we’ll love to chat.