Much to everyone’s disappointment I have been considering buying a condo (though a cheap condo that I can live in until I find my prince charming who will sweep me off my feet and buy a large home to house me- KIDDING).  A small condo that I can rent out easily in case the common-law or marriage relationship (or whatever) that I am in falls through.  Throughout the terrible heartbreak ordeal I learned that it is important as a woman to be financially secure (not that I wasn’t), but I can imagine what it must be like for a woman who may not earn as much (or more) than her partner.

I guess it goes back to my post about financially independent women.  I think it’s important, but that’s just my opinion.

So, enough blabbing.

Let’s go back to the rent versus buy debate.

Now, I know that most people out there will talk about how if you invest the difference into the stock market at a 8% return (really who gets an 8% return these days at a sustained pace?), then renting beats buying any day.

I know that some people would do anything to be a homeowner, and some people would rather sit in a VW beetle full of clowns before they buy a home because they are diehard renters.

So considering the balanced, objective approach, I sought to find some rent versus buy calculators and found some great ones that are objective and practical, including most important factors that can tip the scales one way or another.

When Renting, Considerations Are:

  • Utilities– Are these included with the tenancy agreement?  Hot water? Gas? Electric heat? Cable and internet (sometimes these can be included if you live in a garden or basement suite).  How much does the average utility bill cost?  You don’t want to be faced with big surprises later on.
  • Flexibility– Will you be required to sign a one year lease?  Is your landlord okay with subletting if something happens?  What happens after the one year?
  • Rent increases- Although this might not affect you if you move around, consider whether your landlord will implement rent increases.  You can easily check out the allowable max rent increase annually from your local tenancy branch.  Of course, usually these are on par with general inflation costs.
  • Pets- If you have a beloved dog or cat, unfortunately that seriously limits your options out there.  Most landlords aren’t fans of your furry friend even if they are unbelievably well behaved.
  • What You Will Do With the Money You Could have Used for a Down Payment-

When Buying, Considerations Are:

  • Your Down Payment- How big is your down payment?  A larger down payment means smaller monthly cost.  Also, are you willing to “put all your eggs in one basket” so to speak?
  • Potential Growth- Location location location is key.  I know no one has a crystal ball, but can you envision the place you are purchasing to have potential growth as an investment?  If not, what’s the point of buying?  Isn’t the reason most people buy to make money off of real estate?
  • Expenses- Home ownership adds up- big time.  Property taxes, property transfer taxes, legal fees, real estate commissions (when you sell, there will be inevitable real estate commission), maintenance fees, home insurance.  Generally, selling costs can add about 5% to your total purchase price when the time comes for you to sell.
  • Flexibility- Will you be able to rent it out?  Do you think it will sell easily if push comes to shove (although no one can predict the market, you still need to think about this question).  Are there rental restrictions?

Try to be Objective instead of making an Emotional Decision

Oftentimes we can’t help it.  Deciding whether or not to buy a home can be an emotional decision.  However, before you let your emotions and dreams of fireside chat with friends, barbeque parties on the balcony, and your decorating ideas run wild, think about using a rent versus buy calculator before you make your decision.

The rent versus buy calculator shared by the Globe and Mail is great because it helps you break down the projected costs of both renting and buying and compares them side by side.  It also tells you how long you have to be a homeowner before selling in order to make buying a home more worthwhile than renting.

Readers, did you use a rent versus buy calculator before you made the decision to buy?

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