To buy or not to buy, that is the question.
In Toronto’s insanely busy real estate market and its soaring prices, many people are having hard time affording the purchase of a condo. And since the situation is becoming even more acute as the prices continue to rise, we decided to address it with all seriousness and help our readers decide.
Which is more prudent, to keep on renting or to make an extra effort and buy into the Toronto real estate market, becoming an owner?
There are two positions, one of which is that renting is throwing money down the drain, while buying costs you almost the same yet you get to ultimately keep what you paid for. At the same time, ownership involves multiple other costs that are easy to overlook until you incur them, as well as certain liabilities and commitments a renter doesn’t face.
Still, those pros and cons seem fairly balanced and demand a closer consideration.
Financial Goals
The decision should depend on your goals. If you are looking to build equity in the long term, purchasing real estate is the way to do it. If you prefer to save up money and invest the difference in other avenues, however, such as bonds, stocks or a business, renting is the better choice. Monthly costs of owning a condo can be far more cumbersome than renting one.
Market Stability
This choice also depends on the market, of course. We don’t need an economic collapse like in 2008 to know that ownership for equity can be a precarious prospect. A struggling market may mean slower price growth that ends up not justifying the costs and commitments ownership comes with. In this situation the renter wins, not being bogged down by commitments and responsibilities. If the rent is too high, they can always move elsewhere, whereas the owner is anchored to one place.
Employment Stability
Market situation aside, if you are sure your job won’t go anywhere, buying a condo somewhere nearby is a great idea. Even more so for professionals working from home, or independent business owners who don’t depend on such things. If your workplace is prone to change frequently, on the other hand, renting may be far better as it affords you the flexibility you need to get up and move to a different neighborhood, town or even country of your choice without more than just two month’s notice.
Personal Financial Situation
One thing is true, is that if a buyer can afford a sizeable down payment and good amortization, the monthly costs can be reduced and eventually result in them officially owning the place. If your down payment is not as sizeable, you may buy only to become what is known as “house poor”, a term referring to people whose real estate purchase left them with near zero cash flow. Not a happy prospect.
Lifestyle Vs Freedom
As we mentioned above, a renter is free to leave whenever the rent is up. An owner however is free to live however they want. As an owner, you can change the unit’s layout, interior decor, bring in pets (that not all landlords allow renters to have) and other things a renter can’t freely do because it’s not their property.
Our advice is to consider carefully those five factors, and then decide.
Want more specific advice? Get in touch and speak with an expert!
