tag:blogger.com,1999:blog-7994331885039650384.post8807105439964599977..comments2023-04-17T07:26:17.527-04:00Comments on A Loonie Saved: Financial independence without home ownership?Patrickhttp://www.blogger.com/profile/16816252455472704262noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7994331885039650384.post-65826914970716309692018-04-15T13:04:10.227-04:002018-04-15T13:04:10.227-04:00If you cannot own a home then there may not have a...If you cannot own a home then there may not have any financial benefit actually. You need to keep you financial side harmless and this is why these property factors are important. You can check more details on <a href="https://www.mynestsweetnest.com/Blog/" rel="nofollow">house assignment Toronto</a> that is really good place for the information and make a deal for real estate assignment.Kevin Fleemanhttps://www.blogger.com/profile/12693290504676811129noreply@blogger.comtag:blogger.com,1999:blog-7994331885039650384.post-12769989733062078332017-04-10T22:45:28.626-04:002017-04-10T22:45:28.626-04:00We’ve been stumbling around the internet and found...We’ve been stumbling around the internet and found your blog along the way. <br /><br />We love your work! What a great corner of the internet :)<br /><br /><a href="http://www.successaccountinggroup.com.au/" rel="nofollow">tax accountant Melbourne</a><br />Hillhttps://www.blogger.com/profile/18368099545751776581noreply@blogger.comtag:blogger.com,1999:blog-7994331885039650384.post-44180207155725433402010-04-30T11:33:58.972-04:002010-04-30T11:33:58.972-04:00@Ethan: You're right, locking in the costs is ...@Ethan: You're right, locking in the costs is an important difference I have neglected. To a first approximation, I've always figured I only need to look at next month, because if renting beats buying that month, I should rent and build my downpayment. However, in the long run, I think that reasoning may fall apart under some circumstances. Perhaps I can look at this more closely in a future post.<br /><br />@Potato: I agree with your quibbles. I'm admittedly a bit cavalier about neglecting extra factors that weigh against buying a house, given that I always end up concluding that renting is better anyway.Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-7994331885039650384.post-54591770889030182942010-04-30T00:52:27.653-04:002010-04-30T00:52:27.653-04:00Patrick, I could quibble on a few points* since I...Patrick, I could quibble on a few points* since I've done enough iterations of the buy vs rent post myself, but I have to agree with the overall conclusion. <br /><br />* - ok, let's quibble! First up, I like to use an apples-to-apples comparison as much as possible. I consider it a <b>bonus</b> that when renting you don't have to get a place with the space you'll need in 5 years time, but just enough for what you need now. But people recognize that it's not all that useful to say that renting is better because it's cheaper to rent a 2-bedroom apartment than a 4-bedroom house. Especially with so many people looking at buying little 1-bedroom condos, the apples-to-apples is important.<br /><br />Similarly, I don't bother including the utilities, in part because I had to pay full utilities for my last 2 rentals, so it would have been a wash whether we owned or rented; if they're included in the rent, I try to estimate them and back them out of the rent to get a "purer" comparison.<br /><br />My final quibble is that transaction costs are significant: with realtor commissions, closing costs, and Toronto and Ontario land transfer taxes, it can cost up to 10% to sell a house in Toronto. If the average person is moving every 5-10 years, that's as significant a cost as maintenance or property taxes.<br /><br />Ethan: in the general case, locking in your housing costs is a good thing. However, housing costs are so high now that it's a bad thing. <br /><br />Plus, with rent control in Ontario, your costs are more certain as a renter than as a homeowner: insurance premiums are reportedly up double digits this year, and maintenance may <i>average out</i> to 1% per year, but it comes in very large, discrete, expensive chunks. It may be better to have the certainty of a monthly rent payment that you can forecast out even several years in advance. If you have to get a mortgage, then you definitely lock in your housing costs better as a renter, since a very large part of your housing costs become highly interest-rate sensitive.<br /><br />For the case of someone on a fixed income and a house owned outright, it depends on what the rent is vs. what you think you can make on your money if you invest it. If the rental yield in Toronto is about 6% right now (i.e., a $300k house would rent for $18k/yr), then you need to make about 5% on your money for it to make sense to sell and invest (since ~2.5% of the costs will have to be covered by whatever other income you have even if you own the house and have no mortgage). That would cover the rental costs with enough left over to grow your capital base to cover inflation as well. I don't think 5% is the slightest bit unrealistic, so to me it would make more sense to rent and invest than own right now...<br /><br />But, there is the valid point that many people are not good with money. If someone needs the forced savings of mortgage payments (which to put it another way, means that they are so bad with money that they only way they can save is if threatened with homelessness) in order to save, or isn't good at investing (e.g., if they need an advisor who takes 2% off the top and turns their 5% return into 3%), then owning their shelter can make sense.<br /><br />But I'm not that person, so I rent!Potatohttps://www.blogger.com/profile/18157102363273750204noreply@blogger.comtag:blogger.com,1999:blog-7994331885039650384.post-86576222656577151022010-04-29T00:50:22.567-04:002010-04-29T00:50:22.567-04:00I'm not quite sure how to fit this into your c...I'm not quite sure how to fit this into your calculations, but what about the fact that you are locking in your housing costs? Consider the case of a 30-year, 300k mortgage. In year 1 the monthly cost might be $1,800. That might not compare favorably to renting. But in year 20 the monthly cost is still $1,800, even though the buying power of $1,800 has diminished considerably (say to $1,000). Rent will have increased with inflation, so renters will be paying $3,240 (still $1,800 buying power).<br /><br />I think this demonstrates a couple of things. First, owning a home can be an important part of the plan for anyone living on a fixed income that does not increase with inflation (duh). Second, whether you consider it as a discount to the interest rate of a mortgage or as something else, there seems to be a large chunk of buying power that homeowners (even with a mortgage) are tapping into that hasn't been fully appreciated in your comparison.<br /><br />And also, as you point out, once you have paid off the house then it allows you to avoid a large negative cash flow. Whether you do that with the money you've saved by renting or with a portion of your mortgage payment each month, it wouldn't make sense to NOT do it. This is one reason why I take the "forced savings" argument for homeownership very seriously. How many people will ever own their own home if they don't buy with a mortgage? I think very few, even if they could technically get there even sooner by renting and saving the difference.<br /><br />What are you thoughts?Ethanhttps://www.blogger.com/profile/04638593116820979928noreply@blogger.com