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buzzg · #**6301** Posted **Aug 28, 2019, 12:40 AM**

Condos can mean getting slapped with massive upgrade bills, houses have even more maintenance and upgrade costs (and time doing it). Not to mention commitment to being there for a while. Plus if you own your own business leasing can have big benefits.

borkborkbork · #**6302** Posted **Aug 28, 2019, 2:40 AM**

Quote:

Originally Posted by Bluenote

Equity....

Throwing 2K per month at a rental vs throwing 2k at a condo or house which will only appeciate in value is the smart thing.

Im laughing as i paid 70K for my house in thr 90s and now its worth 465k. Had i rented id have zero equity.

If you bought $70K of equities (S&P 500) in 1990, with dividend reinvestment, your holdings would be worth just north of a million.

I know you can't live in a stock portfolio, and there are lots of good reasons to own, but in Winnipeg, speculative investment probably isn't one.

dmacc · #**6303** Posted **Aug 28, 2019, 12:56 PM**

Quote:

Originally Posted by borkborkbork

If you bought $70K of equities (S&P 500) in 1990, with dividend reinvestment, your holdings would be worth just north of a million.

I know you can't live in a stock portfolio, and there are lots of good reasons to own, but in Winnipeg, speculative investment probably isn't one.

The issue with that statement is you assume the house purchased was with cash. Sure if you have the money it may be better spent in the stock market as you get better returns. The problem is he likely only had $5-10 thousand to put down not $70,000. Comparatively if he put that $5-10 thousand in the S&P 500 and contributed the same as his mortgage to reinvesting in the stock market over 25 years he would maybe be in the same financial position as owning his home.

The only problem is he likely could never have afforded to put the $5-10 thousand in the stock market and reinvest a mortgages worth of money every month while also affording a place to live.

esquire · #**6304** Posted **Aug 28, 2019, 1:09 PM**

^ I have often heard people express the view that they could get a better return on their money by renting and investing vs. owning their home, but I don't know anyone who has actually managed to pull that off.

If it was that simple, you'd think that by now I'd know several people who were wealthy renters.

dmacc · #**6305** Posted **Aug 28, 2019, 1:22 PM**

Quote:

Originally Posted by dmacc

The issue with that statement is you assume the house purchased was with cash. Sure if you have the money it may be better spent in the stock market as you get better returns. The problem is he likely only had $5-10 thousand to put down not $70,000. Comparatively if he put that $5-10 thousand in the S&P 500 and contributed the same as his mortgage to reinvesting in the stock market over 25 years he would maybe be in the same financial position as owning his home.

The only problem is he likely could never have afforded to put the $5-10 thousand in the stock market and reinvest a mortgages worth of money every month while also affording a place to live.

Also assuming you already have the $70,000 to invest, it would likely make more sense to use a portion of it to invest and a portion to purchase a place. This way you are gaining on both ends instead of just the investment side, diversity is key. It is always better, if the rent versus cost of ownership is similar, to own.

drew · #**6306** Posted **Aug 28, 2019, 1:23 PM**

Quote:

Originally Posted by esquire

^ I have often heard people express the view that they could get a better return on their money by renting and investing vs. owning their home, but I don't know anyone who has actually managed to pull that off.

If it was that simple, you'd think that by now I'd know several people who were wealthy renters.

Paying into a mortgage is generally a safe and more or less forced way for someone to invest into something long term.

I get that it would be harder and require you to be more committed to set aside the money (without the mortgage forcing your hand)...

however if you pay $2000 a month for a mortgage, that payment probably includes $1000 of interest plus a conservative $1000 a month of additional soft costs - therefore you are investing $1000 while "throwing away $2000". In my mind, if you can rent for $2000 and still invest manage to invest that additional $1000 - it's still a wash.

It would just come down to what kind of lifestyle you want.

drew · #**6307** Posted **Aug 28, 2019, 1:25 PM**

Quote:

Originally Posted by dmacc

Also assuming you already have the $70,000 to invest, it would likely make more sense to use a portion of it to invest and a portion to purchase a place. This way you are gaining on both ends instead of just the investment side, diversity is key. It is always better, if the rent versus cost of ownership is similar, to own.

This is true, but the issue (IMO) is that people only compare rent to mortgage payments.

It's not an apples to apples comparison.

That mortgage comes with lots of other costs that people usually never consider.

dmacc · #**6308** Posted **Aug 28, 2019, 1:33 PM**

Quote:

Originally Posted by drew

This is true, but the issue (IMO) is that people only compare rent to mortgage payments.

It's not an apples to apples comparison.

That mortgage comes with lots of other costs that people usually never consider.

You are right, that is why I used the term "Cost of Ownership". However, many of the soft costs you speak of are there for renting as well. Insurance, internet, TV and often Hydro and water are costs the tenant must come up with. Sure you don't have property tax but those costs are worked into the rent anyway.

The real benefit you get from renting is the lack of upkeep and risk. The issue is you don't get any of the rewards.

cheswick · #**6309** Posted **Aug 28, 2019, 1:46 PM**

Quote:

Originally Posted by borkborkbork

If you bought $70K of equities (S&P 500) in 1990, with dividend reinvestment, your holdings would be worth just north of a million.

I know you can't live in a stock portfolio, and there are lots of good reasons to own, but in Winnipeg, speculative investment probably isn't one.

Obviously a completely erroneous comparison. He would still need to be paying rent somewhere and as mentioned he likely didn't pay cash for it.

To compare properly you'd have to invest the downpayment 30 years ago, then the monthly delta between the house costs (mortgage, tax, upkeep) and rent payment invested monthly. That delta would likely be the largest positive in 1990, and at some point in time would become negative as the rent increases over time at a larger rate than would the total house costs (mortgage costs would decrease as interest rates dove past 1990). The mortgage payment eventually becoming zero as it's paid off while rent continues in perpetuity.

drew · #**6310** Posted **Aug 28, 2019, 1:58 PM**

Quote:

Originally Posted by dmacc

You are right, that is why I used the term "Cost of Ownership". However, many of the soft costs you speak of are there for renting as well. Insurance, internet, TV and often Hydro and water are costs the tenant must come up with. Sure you don't have property tax but those costs are worked into the rent anyway.

The real benefit you get from renting is the lack of upkeep and risk. The issue is you don't get any of the rewards.

(Not sure about now - but about 15 years ago I think home insurance was about 10x more expensive annually versus tenant insurance).

Yes. It comes down to a lifestyle choice. There is no right or wrong answer.

The "renting is throwing your money away" is a tired and mostly inaccurate argument.

Full disclosure - I pay mortgage payments every week, but I don't begrudge anyone who decides to forgo "ownership" to rent.

dmacc · #**6311** Posted **Aug 28, 2019, 3:03 PM**

Quote:

Originally Posted by drew

(Not sure about now - but about 15 years ago I think home insurance was about 10x more expensive annually versus tenant insurance).

Yes. It comes down to a lifestyle choice. There is no right or wrong answer.

The "renting is throwing your money away" is a tired and mostly inaccurate argument.

Full disclosure - I pay mortgage payments every week, but I don't begrudge anyone who decides to forgo "ownership" to rent.

You comparing tenant insurance for an apartment vs. a house is misleading. The cost of insuring an apartment style condo is roughly $200 a year, similar to the cost of tenant insurance.

You're right, about it being a personal preference though. If you don't want the anchor of owning then renting is perfectly fine. People are free to do what they please, they just have to accept the consequences of those decisions both positive and negative.

Personally renting was one of the smartest decisions I ever made. I bought a condo 7ish years ago, 5 years ago I moved in with a friend and rented the condo. Renting was about half the monthly cost due two us sharing an apartment. 3 years ago me and my wife bought a house and because the condo was revenue generating (Break even) the bank viewed it as a neutral expense and didn't count it against my income or ability to qualify for a mortgage. Now we have a home and a rental property generating equity.