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Author Topic: To Rent or not to rent?
stile
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Babbler # 659

posted 09 August 2001 09:31 PM      Profile for stile   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
A lot of babblers seem to think it is cheaper to rent a place than to own.

Let's look at that. (This will involve some mathematics, I know we all hate math, but it is a mathematical issue)

Assume you will need to have your own place for 50 years. (average life expectancy of 70-20 years of free rent).

The cost of various monthly rents over 50 years:
$400 ----> $240,000
$500 ----> $300,000
$750 ----> $450,000
$1000 ----> $600,000

At the end of this period of time - you have nothing to show for it. Not one penny.

Now we'll compare to purchasing a home (or townhouse/condo) for $120,000. Mortgaged over 30 years at 7%, you pay about $267,000 for the home. Now let's add 60,000 for property taxes and 50,000 for maintenance. Total cost: $377,000.

That is about the same as paying 600/month rent for 50 years. Yet you will have an asset at the end.

But this was a very simple analysis - it did not take into account inflation.

With inflation factored in, the benefits of home ownership increase. Why? Because rent will increase each year, but your mortgage is locked in. Also, your home value should go up (if well maintained) with inflation.


From: B.C. | Registered: May 2001  |  IP: Logged
ergotist
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Babbler # 1176

posted 09 August 2001 09:49 PM      Profile for ergotist   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
i just love your math it's all true...

mmm ... but is it actually so that people think renting is better? or is it more that many many are simply locked out of the ownership loop by a lack of capital and/or lack of interest in them as customers on the part of big lenders ... surely with soaring rents that are bleeding the month by month bunch dry there must be a lot of folks watching even the faint glimpse of a mortgage receding in the distance ... at the tippy top of a slippery slope which the renter is by no means at the bottom of ... that's where the homeLESS live.

[ August 09, 2001: Message edited by: ergotist ]


From: RaT World | Registered: Aug 2001  |  IP: Logged
Debra
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Babbler # 117

posted 09 August 2001 10:10 PM      Profile for Debra   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
Consider also stile that many utilities etc. will charge an exborbident security deposit for renters that is not charged to homeowners. It is much easier to get a loan or line of credit because not only do you have a large assest you are also seen as being more stable and reliable. Ever noticed how on every application for credit they want to know how long you've lived at your last address? Homeowners are going to be much more likely to appear stable.

A study that was done showed that kids who came from homes where the parents owned actually did better in school and had much less stress because they knew where they would be living and had the opportunity to make important social contacts.

Home ownership is also good for the economy as most people that own want to keep their house nice and in good repair even renovate from time to time. These things all require that there be jobs for hardware store employees, employees for the various suppliers to the hardware store, tradespeople, local services on and on.

For our family we would be much better off if we owned as our payments would be considerably less on a mortgage. Unfortunately we can't afford a down payment. And the rent to own schemes are too expensive for our budget.

lets look at the fridge senario again if you are in a bind when your fridge breaks down using your home as collateral you can get a line of credit at say 10% an 800 dollar fridge financed over a year would cost 843.96
Now suppose you have to go to a rent to own place. The same fridge will cost you a minimum of 3120 dollars. These are the hidden costs of tenants.Not to mention having to put you own money out for repairs thereby improving the value of someone elses home.
We once lived in a house the landlord couldn't sell. After I planted, painted,wallpapered he put the home back on the market and it sold almost immediately. We of course lost our home. Renting such fun.

[ August 09, 2001: Message edited by: earthmother ]


From: The only difference between graffiti & philosophy is the word fuck... | Registered: Apr 2001  |  IP: Logged
DrConway
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posted 09 August 2001 10:14 PM      Profile for DrConway     Send New Private Message      Edit/Delete Post  Reply With Quote 
Moral of earthmother's story - Don't do the landlord's work for free so he can get a better house sale

As for owning vs renting - I'll just make a comment I made on another thread: I have never been able to comprehend the people who view a house as a capital gain instead of a place to live. I have also never understood the constant crapping about property values among people that clearly will never sell their houses, or if they do, will not turn over the money several more times unlike working-age mobile parents. (Think senior citizens)

What particularly gravels me is that I personally will probably never be able to even own one of those stupid little condos because to get a CMHC-qualified loan you need a 5% down payment. How the hell can I save up around $5000 on a wage of ~$1500 a month, pre-tax?

Addendum: About those people on the Musqueam land that got sweetheart leases since the 1960s? When I heard about how people were paying leases based on property values as of the 1960s, in locked-in contracts, and they were whining and crying about having to renegotiate their contracts, I just said to myself, "Deal with it, you lucky SOBs. You got a sweetheart deal for 30 years and now you're complaining about the landowner wanting market lease rates instead of letting inflation continue to erode the value of the lease payments."

[ August 09, 2001: Message edited by: DrConway ]


From: You shall not side with the great against the powerless. | Registered: May 2001  |  IP: Logged
stile
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posted 09 August 2001 10:47 PM      Profile for stile   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
This is a classic example of working class oppression.

A rich man can sell a few thousand stock options or blue chip shares, walk in to the real estate office and buy a home. He has minimal to zero need for mortgage financing.

A poor person has to spend many years scrimping and saving for a downpayment (meanwhile tossing money away on rent.)

Once they can afford the downpayment, they will spend years paying off the mortgage and will eventually have payed 2 to 3 times the original cost of the house.

If this is not oppression, I don't know what is.


From: B.C. | Registered: May 2001  |  IP: Logged
ergotist
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posted 10 August 2001 12:16 AM      Profile for ergotist   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
indeed Stile ... this is one heavy manifestation of how those who HAVE control the fortunes of those having not ...

a sad story? sad stories are usually longer than the audience can endure so i shall endeavour to be succinct ...

i was drawn by your thread in no small way because i and my dear are cap in hand for a mortgage as i type. not for any $150,000 suburban mansion either ... we left behind a half finished but fine wee house we built ourselves thru five years of sweat and hauling water ... left it behind in Digby Co. NS. for work in TO cuz we just couldn't afford not to anymore.

... happily this 20x20 foot dream was resting on a blueberry field his mother owns. she lives next door in her house and stretching behind us are 25 acres of wood. very sadly she now must sell ... she will give us the field (4 acres), sell about four acres to go with her fine house to some lucky soul, while we hope to finance the purchase of the trees ... she hopes AND we hope we succeed because the odds that they'll be clearcut rise dramatically if we fail. south western NS is IRVING country and they are a rapacious lot. busy clearing and spraying everywhere down there with a vengeance.

we first needed to determine the value of those 25 acres. this is calculated by counting the cash value of the pile of dead softwood you'd have if you cut it all down. turns out there's not much harvestable softwood though some is coming along ... there is lovely ash in abundance and maple and a bit of wetland toward the back, pleasing to creatures of all sorts. a number of "over mature" trees were noted - the dead and dying who feed the forest floor and are considered a waste of commercial space by some. the figure arrived at was $300 per acre. quite below the average of $1000 but thank gawd because we may actually pull it together ($7,500) and it's enough to cover my mother-in-law's immediate needs ...

off i go to start throwing our networth at mortgage brokers ... only recently passing through the last rosy glow of early adulthood where i made a special point of mocking mortgage propaganda in banks and swore i'd never end up emulating the "shiny happy" people in the brochures ... well. i had no idea what it was all about except that it meant chaining ourselves to a fat debt for many long years ... we are only barely with our heads above water after a year in "the big smug" ...

my dear makes decent coin writing code for TeeVee-Oh, entry level ... i make art and an art out of finding the best price for ethically available green peppers but i do not make money very well. to quote Stan Rogers "thank gawd we've got no kids as yet" and no real debt to speak of. no plastic or shite of that sort ... we thought we'd ask for a $15,000 open mortgage amoritized over ten years. ($7,500 for the land and the rest toward the house which is so not finished) it seems you might just as easily ask for a trip to the moon to plant petunias ...

after 8 hours spent filling out one online app. after another there's been one reply from a guy who thought for sure we didn't put as many zeroes on the end of that number as we meant to. he sed "most major lenders will not consider a mortgage for less than $30,000. "oh." we said. so now we're after $30,000 over 20 years heh, heh ... that'll fool 'em ...

or will it? we are not so stable by a bankers standards ... we have not bowed low to the credit gods and proven ourselves worthy of debt. we are shifty carpet bagging easterners who float like dandelion fluff from one short-term exploitive contract job opportunity to the next and have often had to pay phone and power in installments after the bills turned an angry pink colour and service terminated ... i declared bankruptcy on my student loans, way back in '96 but equifax has a long sticky memory for every sin committed against the economic order and the priests of the golden bowl.

how lucky we are to require so little in order to secure so much and for at least one of us to be clever at something society values enough to pay relatively well for and ... "thank gawd we've got no kids as yet..."...

i think i stink at succinct ...
sigh.

p.s. (if any sages out there have advice on how to hone our begging skills i'm all ears cuz those trees will NOT end up under the saw while i live and breathe)


From: RaT World | Registered: Aug 2001  |  IP: Logged
Trisha
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Babbler # 387

posted 10 August 2001 01:40 AM      Profile for Trisha     Send New Private Message      Edit/Delete Post  Reply With Quote 
I did real estate in the law office 25 years ago so some of my info is outdated, however there are hidden expenses stiles hasn't accounted for. Mortgages are not really locked in. They have to be renegotiated every few years at the current rate. You do negotiate originally as if it is for 30 years or whatever and sometimes the new rate is lower than the original when you renegotiate but I sure wouldn't count on it. There are hidden costs that they don't tell you about right away, so always ask. Also, your insurance goes up every year and is added to your payment, meaning that for the first while, you are paying the insurance and taxes but not on the mortgage itself. Taxes go up every year plus you could be reassesed for taxes depending on what repairs you do. There's a lot more to look into than you think.

Really, if you can afford it, ownership is the way to go. You must remember, too, that house values can drop but your commitment won't. I would say anyone planning to buy should have a substantial savings over and above the downpayment put aside. Closing costs and legal fees should be laid out on paper (these are over and above your downpayment, insurance payment and other expenses) as they have to be paid on the closing date.

Also, no matter how carefully you have looked over the house, you don't know that the furnace won't blow in a few weeks, or the roof leak or basement flood during the first heavy rain. Be prepared for the possibility of repairs from the beginning.

The majority of people will never pay off their mortgage, so be especially careful to keep the value of your house and property high so you will get good equity out of it when you sell. Try not to take out second mortgages or loans on your house, at least until you are sure you have paid your mortgage down a fair amount.

Oh, a couple of other hints, always make a low but reasonable offer, never go for the asking price. Asking prices are always inflated. Check out a full year's heating and electrical payments of the seller's if you can and be suspicious if they only offer summer ones. Also, ask for proof of any claimed repairs, it is not unusual for people to claim all new windows when only one or two have been replaced, or to say they replaced the furnace "a few years ago" and it's closer to 20. In short, do your homework and be sure what you can afford to commit to before doing it.


From: Thunder Bay, Ontario | Registered: Apr 2001  |  IP: Logged
clockwork
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posted 10 August 2001 02:18 AM      Profile for clockwork     Send New Private Message      Edit/Delete Post  Reply With Quote 
Renters are getting screwed

Two cents: I say renting is cheaper... if you don't live alone or have a sizable down payment on a home.

[ August 10, 2001: Message edited by: clockwork ]


From: Pokaroo! | Registered: May 2001  |  IP: Logged
andrean
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posted 10 August 2001 11:33 AM      Profile for andrean     Send New Private Message      Edit/Delete Post  Reply With Quote 
While I agree that it's cheaper to own a house than to rent, I recognize that the challenge to pulling together a sufficient down payment can seem insurmountable. That's partly, I think, 'cause people have a very traditional idea of home ownership - they have to do it alone or with their spouse, it needs to contain only their personal family unit, etc.

I bought a house with my best friend five years ago, when I was 25 and she was 24. We put down the bare minimum possible (I believe it was 5% of the purchase price) on the shabbiest house in the best downtown Toronto neighbourhood we could afford and moved in, along with her boyfriend and another guy who needed a place to live. The first thing we did was renovate the completely unfinished basement into a bachelor apartment. The rent from it has helped to finance the further (massive) renovations that the place required.

We're still living there together, me, my best friend, her bf (now husband), their two kids and another woman friend of ours, plus the tenant in the basement. It's a different configuration of a 'family' and can be decidedly inconvenient at times, but the bottom line is that we own property in downtown Toronto, our monthly 'rents' are affordable ('cause there's so many of us!) and we can't be evicted at someone else's whim. I'm willing to put up with a good bit of inconvenience for that!

Lots of people criticised our decision when we were starting out, concerned about what would happen to the house if my friend and I were to have a falling out. IMO, that's not even a concern; what happens to a house when couples get divorced? No one would discourage married people from buying a house because they might get divorced. And I think people are generally more likely to divorce than they are to ditch their best friend.

Home ownership can be expensive insofar as all the problems are your problems - there's no landlord to call on when stuff breaks, property taxes and utility costs keep rising - but if you're not dead committed to living alone or with only your SO, it can be managed affordably. If you share a house with even three other people, each paying even $600 a month towards it, well, you can run a lot of house on $2400 a month, and still have some left over for a contingency fund.

And for those babblers in search of a mortgage, I'm certainly no finacial wizard, but I'd skip right over the big banks and go straight to your local credit union. Especially if you're in Toronto - Metro Credit Union has all the stuff that the banks do, competitive rates and social responsibility to boot.

[ August 10, 2001: Message edited by: andrean ]


From: etobicoke-lakeshore | Registered: Apr 2001  |  IP: Logged
Victor Von Mediaboy
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posted 10 August 2001 11:57 AM      Profile for Victor Von Mediaboy   Author's Homepage        Edit/Delete Post  Reply With Quote 
President's Choice Financial has good mortgage rates too, and you get free groceries.


I've known a few people who have bought houses communally like that. A girl I dated at university bought a house in first year, using her OSAP for the down-payment. She rented out most of the joint while she was in school, and then sold it when she graduated.

My gf was going to buy a house with a friend of hers. She ended up not qualifying for the mortgage, because her friend was a financial basket-case.


From: A thread has merit only if I post to it. So sayeth VVMB! | Registered: May 2001  |  IP: Logged
Slick Willy
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posted 10 August 2001 12:25 PM      Profile for Slick Willy     Send New Private Message      Edit/Delete Post  Reply With Quote 
Perhaps the biggest advantage to renting over own is that in two months you can end all obligation to the owner of that property. That is something owning a house does not allow for. I think they each have their own merits and it is subjective to the individual which is more important to them.
From: Hog Heaven | Registered: Apr 2001  |  IP: Logged
Victor Von Mediaboy
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posted 10 August 2001 01:04 PM      Profile for Victor Von Mediaboy   Author's Homepage        Edit/Delete Post  Reply With Quote 
What if you're locked in to a 12 month lease? Depending on the climate of the market, it can be easier to sell one's home than to get out of a lease.

But I agree that it all depends on the situation. Both options can be cheaper, depending on a different factors.


From: A thread has merit only if I post to it. So sayeth VVMB! | Registered: May 2001  |  IP: Logged
Slick Willy
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Babbler # 184

posted 10 August 2001 02:12 PM      Profile for Slick Willy     Send New Private Message      Edit/Delete Post  Reply With Quote 
quote:
What if you're locked in to a 12 month lease?

There is that. But recalling the days of rent for myself, I would endure most anything and go to great lengths to avoid moving all the junk we keep in one garage (WHAT! I can't throw this out) to the next one.

Not that this is on topic but it isn't that far off. We have been looking to buy some land somewhere off the beaten path (not to far off) where we could build our own place and have things the way we want them. One of the places I found
Property for sale
If someone could manage to make the monthly payments, they could own some land with little down payment in about 4 years. We plan on living in a trailer for a couple or 3 years while we build it. Not for everyone mind you, but if it is your dream to get out of the city to a more rustic maybe even honest way of life then this is an alternative.


From: Hog Heaven | Registered: Apr 2001  |  IP: Logged
Sam
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posted 10 August 2001 11:29 PM      Profile for Sam     Send New Private Message      Edit/Delete Post  Reply With Quote 
Don't believe anyone who says that breaking a lease is tough.

Breaking a lease is actually relatively easy as long as you give two months notice to your landlord and follow some basic tips. A decent community legal worker at your local clinic can tell you how to it in about ten minutes.
The advice is free.

Breaking leases is especially easy in places like Ottawa and Toronto where the rental vacancy rate has hit the floor.

I've been advising tenants on how to break leases for years, and I always tell them to call me back if the "tactic" fails...so far none have.

The saddest part are tenants who mistakenly renew their lease after one year thinking that they have to. In fact, it is sometimes best simply to let the lease expire and it automatically renews itself on a month-to-month basis (Ontario).

Situations in houses versus apartments differ.

Sorry for going on but I love helping tenants break their contracts...especially when the landlord fools them into renewing.


From: Belleville | Registered: May 2001  |  IP: Logged
clockwork
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posted 11 August 2001 12:54 AM      Profile for clockwork     Send New Private Message      Edit/Delete Post  Reply With Quote 
There is a provision in my lease that explicitly states that after a year, the renter need only give two months notice to leave. Since this has been my first formal lease, I thought this clause was standard (as in, it should be on every formal leasing arrangement).
From: Pokaroo! | Registered: May 2001  |  IP: Logged
Pimji
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posted 11 August 2001 03:26 AM      Profile for Pimji   Author's Homepage     Send New Private Message      Edit/Delete Post  Reply With Quote 
In Ottawa landlords can hardly wait until the tenant leaves so they can jack the rent up even higher. I have a friend who was my old nieghbour. I moved and they stayed. The entire block of rental units were bought by a developer and were then sold as freehold townhouses. They gave $500 to the tenants to cover moving expenses if they chose not to buy. This was 5 years ago. My friend who was at the time my neighbour decided to pass on the cash and they stayed. By law tenants can't be evicted when rental units are turned into private property. She was just offered $5000.00 to get them to move or to buy. In Ottawa new house prices are astronomical, $250,000+, and slim listings for older houses which have also been driven up.
I'm glad I bought the home I'm in now with my family. It is expensive but we are really going for it by economizing and saving as much as we can to pay off the mortgage. Long hours and hard work. It is a gamble that will hopefully pay off in less stress at work and less hours after we have dug out of the mortgage hole.
Low intrest rates aren't the great money savers as they are made out to be in comparison to the price of houses and the relation of the cost of living. A person buying a house now can expect to work years longer to pay it off than a person twenty or thirty years ago.

[ August 11, 2001: Message edited by: Pimji ]


From: South of Ottawa | Registered: Apr 2001  |  IP: Logged
Kelly
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posted 20 September 2001 07:56 AM      Profile for Kelly     Send New Private Message      Edit/Delete Post  Reply With Quote 
*sigh*

My partner and I would love to own a house. But, sadly, we spend so much on rent that we don't have much left at the end of the month to save for a downpayment.

Does anyone know of any grants/financial assistance available to young couples starting out? If there aren't any, there should be some, damn it, because I said so!

Oh, and yes, what earthmother did is so common: fixing up a place then the landlord sells it or you have to move out, etc. But if a rental unit is completely shabby it's difficult to resist the temptation to fix it up. And if anyone has ever tried to find rental accomodation in Victoria, you know what I mean by "shabby"


From: Victoria, BC | Registered: Sep 2001  |  IP: Logged

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