Toronto Condos: Should you rent or buy? • Hacker News Board

Re: Toronto Condos: Should you rent or buy?

#31

Post by davenugent » Wed, Jun 03, 2015, 4:52 PM UTC

hartator wrote: post #23

DMac87 wrote: post #20

The assumptions made by the author are ridiculous, namely: - In the 10-year comparison, rents paid are not factored in at all. - In the forward-looking comparison, condo prices are assumed to be flat, mortgage rates go up (why? can't they be locked in now?), while equity prices go up 6-8% per year - Taxes are not factored in at all - capital gains on a primary residence are tax-free, while investment gains will be ta…

+1. It's also assuming you are getting the same amount of money to invest in stock than to invest in your condo. Banks are more likely to finance your primary residence than your stock investment.

leverage is leverage, can work for or against you. Returns in real estate have been elevated above long term mean returns through low interest rates and flexible government programs.. increased amortization rates, lower downpayments, higher CMHC eligible mortgages.

Re: Toronto Condos: Should you rent or buy?

#32

Post by hbbio » Wed, Jun 03, 2015, 4:55 PM UTC

The article is interesting but does not mention a few facts:

- In several countries (including France where I live), there is a "tax break" in owning real estate since the virtual rent is not added to revenues (or: you cannot deduct your rent from your revenues). For instance, if you're renting a flat that you own but at the same time rent to someone the flat where you live, you'll be paying taxes on your rent income, but deduce nothing from the rent you pay.

- Rented flats tend to be in less optimal condition that flats that you own. Since the utility of a flat is to live (in the best conditions available), it's sometime a good idea to invest in renovation works, plan changes, etc. for which the owner of a rented flat will see little value.

And also it mentions but does not insist on one major thing. Taking a mortgage to acquire a property is a bet on future inflation. If inflation is/will be high is the next years, getting a fixed rate mortgage is a great opportunity (and there are little chances you will be able to get a significant mortgage for anything else than real estate). If inflation is low (or worse, we enter a period of deflation), renting is by far the best option. IMHO this criterion is by far the most important while deciding about rent vs. buy.

Re: Toronto Condos: Should you rent or buy?

#33

Post by mfringel » Wed, Jun 03, 2015, 5:04 PM UTC

eekfuh wrote: post #22

OldSchoolJohnny wrote: post #17

Earlier quoted context omitted.

Detached houses could end up costing far more in maintenance. From experience.

One time maintenance fees versus monthly HOA fees that you are required to pay.

That's true, but only in the most naïve sense.

A house starts falling apart as soon as it's put together... and it keeps falling it apart, and you have to keep putting it back together. The distribution of expenses is lumpier with a house than with a condo, but it's certanly an ongoing cash outflow.

Re: Toronto Condos: Should you rent or buy?

#34

Post by pmelendez » Wed, Jun 03, 2015, 5:06 PM UTC

hbbio wrote: post #32

The article is interesting but does not mention a few facts: - In several countries (including France where I live), there is a "tax break" in owning real estate since the virtual rent is not added to revenues (or: you cannot deduct your rent from your revenues). For instance, if you're renting a flat that you own but at the same time rent to someone the flat where you live, you'll be paying taxes on your rent income…

> " In several countries (including France where I live), there is a "tax break" in owning real estate since the virtual rent is not added to revenues "

I believe that's why the author limitted the discussion to Toronto's condos.

Re: Toronto Condos: Should you rent or buy?

#35

Post by g8oz » Wed, Jun 03, 2015, 5:06 PM UTC

The gold standard for this kind of comparison is the New York Times Rent vs Buy calculator. Note how relatively small changes in any one of many factors can result in very different outcomes.

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calc...

Re: Toronto Condos: Should you rent or buy?

#36

Post by Joeri » Wed, Jun 03, 2015, 5:13 PM UTC

hbbio wrote: post #32

The article is interesting but does not mention a few facts: - In several countries (including France where I live), there is a "tax break" in owning real estate since the virtual rent is not added to revenues (or: you cannot deduct your rent from your revenues). For instance, if you're renting a flat that you own but at the same time rent to someone the flat where you live, you'll be paying taxes on your rent income…

One thing easily forgotten with renting is that you can be kicked out. This can be extremely stressful. Then again, as a home owner you can be hit by surprise maintenance work, which has its own source of stress. But, on the other hand, as a renter you may not have much control over necessary maintenance work, and be forced to negotiate with your landlord through the court system. Trade offs...

Re: Toronto Condos: Should you rent or buy?

#37

Post by ska » Wed, Jun 03, 2015, 5:18 PM UTC

manishsharan wrote: post #10

Neither. I had to do it all over again, I would buy a detached house in the middle of boondocks ( like Mississauga, Brampton , Vaughn ,Markham , Richmond hill etc. ) . The supply of detached houses is limited whereas condos in Toronto are growing like weed. The detached houses have grown more in value and they are not encumbered with maintenance fees.

That's really a different and more difficult question. In many cities (like Toronto) living in the "boondocks" as you put it vs. downtown is a pretty fundamental lifestyle change.

This comparison at least narrows the variables a lot.

Re: Toronto Condos: Should you rent or buy?

#38

Post by branchless » Wed, Jun 03, 2015, 5:22 PM UTC

manishsharan wrote: post #10

Neither. I had to do it all over again, I would buy a detached house in the middle of boondocks ( like Mississauga, Brampton , Vaughn ,Markham , Richmond hill etc. ) . The supply of detached houses is limited whereas condos in Toronto are growing like weed. The detached houses have grown more in value and they are not encumbered with maintenance fees.

Yeah and I'd buy Apple. Let me know when you get the time machine.

Re: Toronto Condos: Should you rent or buy?

#39

Post by branchless » Wed, Jun 03, 2015, 5:23 PM UTC

kazinator wrote: post #3

> Myth 4: Renters throw cash away, at least owners build equity It's no myth, because you have to live somewhere. (Well, you could put your money elsewhere, and go live in a cardboard box under a bridge, but let's be realistic.) Owners are building equity with the money they would otherwise be completely throwing away on rent, and they got into that situation with just a little money down. (Depending on area), curren…

Think in terms of leverage. Next up: should I buy in Detroit - 2005 edition.

Re: Toronto Condos: Should you rent or buy?

#40

Post by refurb » Wed, Jun 03, 2015, 5:26 PM UTC

DMac87 wrote: post #20

The assumptions made by the author are ridiculous, namely: - In the 10-year comparison, rents paid are not factored in at all. - In the forward-looking comparison, condo prices are assumed to be flat, mortgage rates go up (why? can't they be locked in now?), while equity prices go up 6-8% per year - Taxes are not factored in at all - capital gains on a primary residence are tax-free, while investment gains will be ta…

why? can't they be locked in now?

Canada doesn't have 30 year mortgage terms like the US. The max is 10 years and many people lock in for 5. However, with the low interest rates, many, many folks are doing the low teaser rates for 1%/year and renewing each year.