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Should I Rent or should I Buy?

Should I Rent or should I Buy?

Should I Rent or should I Buy? That’s a question that shows up a lot in today’s media outlets. The answer is different for virtually everyone and everyone’s situation is different. Considering the continuous verbal barrage that we all hear from both media and government, we are led to believe that purchasing a place to live is getting more and more, out of reach. The Finance Ministers of Canada and its provinces and other so called experts in money matters repeatedly tell the public at large that we have too much debt, we need to save more, and they seem to enjoy setting new mortgage rules that appear to make it harder and harder for first time buyers to enter the real estate market. Yet, despite the drone of daily noise, we are still buying real estate to live in and as an investment.


The most obvious market for first time buyers is Generation Y. Primarily, those between the ages of 20 and 37 who in most cases will follow the normal sociological development of meeting a mate, getting married, buying a home, having children, and adding the two cars, dog, etc. This however, is not necessarily the primary direction Gen Y takes. There are those who, with good planning and solid, logical influence from their baby boomer parents, will learn to save early in life. And, as Gen Y lives longer with their parents, they will be able to jump into a purchased home on the first move out from under the family roof. Keep in mind; it could be a small condo, in an outlying market, with the 5% down that still exists for first time buyers, provided it is their primary residence. While Gen Y usually wants to be in the heart of the city with less need for driving and wanting to have access to amenities like restaurants, shopping and work; the development of suburbs outside of major centres and the improving transit systems, makes it more attractive to live in these areas.


So what’s the biggest factor about renting vs. owning? The most obvious is keeping your money versus giving it to your landlord so he can keep his money. Yes, renting provides the luxury of no maintenance and not having to save thousands of dollars for a down payment however, will your landlord keep your rented home in the same condition you would, if you owned it? And, how does it feel when you spend that $ 1,000 to $ 1,500 per month for a few years, and have nothing to show for it? After five years, those numbers translate to $ 60,000 and $ 90,000 dollars!


If you saved just $ 15,000.00 and secured a job that paid you $ 42,000 per year, you could purchase a condominium in the $ 200,000 dollar range and pay about $ 1,100 per month for the financing and heating. This is the number that banks and lenders will look at as about 32% of your income. After the same five years as above, you would have equity in that property of over $ 30,000 dollars! That’s your money and if you had a five year term on the mortgage, when you re-financed, you could use that money to increase your wealth, (buy another property) or buy some toys, take a vacation, whatever. Actually, you can get access to that money much sooner through an equity line of credit.


The major questions from this conversation are; 1. Are you willing and disciplined to save that $15,000 while you live with your parents? 2. Will you live in an outlying area away from the major city centre? 3. Can you get that $42,000 job? These are all doable, if that’s what you want.


You’re going to want to move out eventually, and having a plan is a good thing.  Having equity in real estate is a great thing. Don’t pay your landlord, pay yourself.


Legacy Wealth Income Properties helps people build wealth through real estate.  We’d be happy to help you.


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