Real Estate

Condo... Buy or Rent?

  • Last Updated:
  • Oct 21st, 2017 9:34 am
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[OP]
Member
Jun 15, 2017
263 posts
118 upvotes

Condo... Buy or Rent?

For example a One BR condo in Scarborough is listed at around &300,000.

If a couple working leases this unit, it will cost $1600 per month.

If they buy even with 5% down payment, @ 3% for 30 years, monthly expenses like Mortgage, maintenance fee and taxes are coming around $1670.

Wouldn't it makes sense to buy it instead of renting it?

If a couple stays there for 5 years...the mortgage balance will be 253,000... plus little more appreciation is a bonus...they can get 35,000 after agent fee plus appreciation.
They pay 102,000, get bAck 35,000... assume 3% appreciation per year.. profit will be 45k
Effective price is 102-45-35 = 22,000

Why wouldn't many people do this?

If they pay rent for 5 years it costs 102,000 (avg rent 1700), no money back.
16 replies
Member
Mar 20, 2017
209 posts
221 upvotes
Lavaris wrote:
Oct 12th, 2017 11:20 pm
Why wouldn't many people do this?
Because:
Lavaris wrote:
Oct 12th, 2017 11:20 pm
assume 3% appreciation per year..
The appreciation in 2017 is 22-28%. Its a little bit overkill, but 3% for Toronto is also not a normal value. For Texas maybe.
Renting will not be a constant too. Rent control will help your to ignore this fact for a while, but eventually you will find that real rent increase is pretty high each year (10-17% in 2017).
[OP]
Member
Jun 15, 2017
263 posts
118 upvotes
GalvToronto wrote:
Oct 12th, 2017 11:26 pm
Because:



The appreciation in 2017 is 22-28%. Its a little bit overkill, but 3% for Toronto is also not a normal value. For Texas maybe.
Renting will not be a constant too. Rent control will help your to ignore this fact for a while, but eventually you will find that real rent increase is pretty high each year (10-17% in 2017).
I wouldnt count on this appreciation every year and rents also....this is an exceptional year

My point is when whole thing works out to be better to buy with 15,000 down payment, how come we dont see many buyers for one BR as primary..
Member
Mar 20, 2017
209 posts
221 upvotes
Lavaris wrote:
Oct 12th, 2017 11:34 pm
I wouldnt count on this appreciation every year and rents also....this is an exceptional year

My point is when whole thing works out to be better to buy with 15,000 down payment, how come we dont see many buyers for one BR as primary..
Wanna take 2016 year? 6.5% for Toronto and 19% for suburbs.
It does not matter what you count on, other investors are estimating potential appreciation their way, and who knows which one of you is right...

What do you mean we don't see many buyers for 1BR? 1bedroom condos are on fire now.
[OP]
Member
Jun 15, 2017
263 posts
118 upvotes
GalvToronto wrote:
Oct 12th, 2017 11:40 pm
Wanna take 2016 year? 6.5% for Toronto and 19% for suburbs.
It does not matter what you count on, other investors are estimating potential appreciation their way, and who knows which one of you is right...

What do you mean we don't see many buyers for 1BR? 1bedroom condos are on fire now.
More of investors than primary residence....this is my point...
Member
Mar 20, 2017
209 posts
221 upvotes
70% of purchasers are first time homebuyers vs 30% already own something.
Almost 99% of first time homebuyers get a condo for the purpose to have a primary residence.

Speaking about 30%, not all of them are investors, some people just upgrade/downgrade, buy cottages or a property for kids.

Also, 68% of population already owns a home. They don't have an affordability question at all.
Deal Addict
Feb 22, 2011
1676 posts
1475 upvotes
Toronto
Do it again with 20% down, works out a lot better. I mean you can't even get a 5% down 30 year mortgage, the minimum is 20% down for that. Also many people own because they don't want the looming threat of being evicted. Plus 46 years of RE history in Toronto has had an average, mean and annualized return over 7%.
[OP]
Member
Jun 15, 2017
263 posts
118 upvotes
rjg4235 wrote:
Oct 13th, 2017 8:19 am
Do it again with 20% down, works out a lot better. I mean you can't even get a 5% down 30 year mortgage, the minimum is 20% down for that. Also many people own because they don't want the looming threat of being evicted. Plus 46 years of RE history in Toronto has had an average, mean and annualized return over 7%.
Yeah i know with 20% its even more good.
I am just saying even with 5% its break even to rent for primary house.

Should we conclude rent is cheaper or price is cheaper?
Deal Addict
Feb 22, 2011
1676 posts
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Toronto
Lavaris wrote:
Oct 13th, 2017 8:52 am
Yeah i know with 20% its even more good.
I am just saying even with 5% its break even to rent for primary house.

Should we conclude rent is cheaper or price is cheaper?
Rent is of course cheaper. Everyone needs to make a decision that is best for them.
Deal Addict
Sep 12, 2006
1124 posts
162 upvotes
Of course in your scenario it makes more sense to buy.

But mortgage rules getting tougher, likely they'll need 30-60K downpayment. Not many people have this just laying around. And from those that do, only a small percentage are shopping in Scarborough.
Deal Addict
User avatar
Dec 27, 2009
3379 posts
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Ottawa, ON
I don't think it makes a lot of sense to buy unless you know you enjoy living in apartments and condo rules. Renting gives a lot more freedom to move around. There are many considerations besides strictly financial ones (and I still think renting makes more sense for the scenario you described which isn't taking condo fees, taxes, upkeep into account).

I rented a condo for years and would personally never buy a condo. It was much cheaper to rent for me. I own a single dwelling now (I'm in a more reasonably priced market than when I lived in Victoria).
Deal Expert
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Apr 21, 2004
40167 posts
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Your outlook where interest rates are going to be 5 / 10 / 15 years from now will sway you to buy or rent. I think interest rates plays a bigger role in North American housing market because residential units are much more liquid and there are a lot of qualified households that can get in and out but mortgage qualification is based on income and interest rates, whereas in many developing countries, prime property prices are dictated by how corporations/businesses are doing because /executives owners can easily afford >$2m properties there while they will be off limit to most other households.

If you think interest rates will stay below 5% in the next decade, then maybe buying when able to can be advantageous because these condos will be bid up by households like yourself if they are priced out of the ground type market.

If rates are going to be between 6-8%, there could be some price corrections as leveraged investors may have to unload.

The one reason I would buy is stability and not being forced to keep moving around but then you will encounter ever increasing condo fees you have no control over.
Deal Fanatic
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Jun 26, 2005
7278 posts
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If one can afford the downpayment, pick a decent location (I'm talking about Toronto) , it is always better to buy.

It's about leverage and your future. Or your kids future. Condos in Toronto will double in value every 10yrs. Some even faster (eg downtown).

Assuming you wanna stay in Toronto, if you don't sacrifice now to pay a mortgage (instead of rent), then your kids will have no choice but to continue to rent. Look at condo prices 20 yrs ago , compare that to now. , now imagine what prices will be in 2037.

Houses are already over $1mill now, hence condos are being snatched up at $300-400k a piece. Imagine 2037.

. If you aren't wealthy already, then one generation will need to sacrifice so you can pass on a property to the next generation.

This is why the rich get richer and poor get poorer. Bottom line, save enough for 20% down and buy.
Deal Fanatic
Dec 11, 2008
7144 posts
431 upvotes
Didn't notice but did you consider land transfer tax? Isn't Scarborough double being a part of Toronto?
[OP]
Member
Jun 15, 2017
263 posts
118 upvotes
speedyforme wrote:
Oct 19th, 2017 12:34 pm
Didn't notice but did you consider land transfer tax? Isn't Scarborough double being a part of Toronto?
So for the sake of one time double LTT 3k extra you want to backout and
1. Pay more premium in suburbs (30-50k extra)
2. Keep unit for idle for 5% (if investor) and loose 1000 yearly
3. Pay $100 more transit and $50 more for prop tax... total $150 monthly recurring for life time
4. Spend 30 minutes one way for travel time

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