Deciding between buying a property versus renting one is not an easy choice for most people. There are many things to take into account, and balancing all of them requires careful thought. Contrary to popular belief, it is not always better to buy than to rent. It is important to acknowledge the financial repercussions this decision may have, which can vary widely on a case-per-case basis (which is one of the reasons why it is widely recommended to consult a professional beforehand). With that being said, here are some of the essentials that you need to consider before taking the plunge:
Projected staying time
This one is a bit of a no-brainer, since in almost all cases it is better to rent a property if you’re planning to use it for a short or medium period of time, while buying it represents a big commitment of both time and resources to both the property and the area in which it is located. However, it is essential to remember that buying is less flexible than renting in the event that you have to move at some point because of personal or professional reasons, while a lease can be terminated quickly enough with relatively less hassle. On a financial level, buying means that the upfront fees, such as the down payment, are typically spread out over several years, while when renting, the initial costs are usually limited to the rent security deposit (and the broker’s fee).
Property maintenance costs
Owning a home means taking responsibility for a wide array of maintenance costs, from heating and/or cooling systems to plumbing. Besides this, house renovations ought to be undertaken keeping in mind the fact that it is always convenient to renovate in such a way that the improvements done raise the market value of the property in one way or another. Of course, this can eventually pay off in such a way that it allows you to acquire a bigger house or save extra funds if you’d prefer to downsize. On the other hand, in the case of a rented space, most major reparations are undertaken by the landlord and usually the terms of the lease include provisions in the case of minor issues. Thus, renters don’t directly pay for these maintenance costs.
In the case that you own a property, the net proceeds are the amount that you will receive from the sale of said property, after having subtracted the closing costs such as the broker’s commision, any extra tax on the profit that exceeds your capital gains exclusion, and the balance paid to the mortgage bank. For those who rent a place, their net proceeds are essentially the return of the security deposit, which is given back at the end of the lease (as long as the lease agreement was adhered to). Logically, buying a property represents a larger investment which is, in most cases, directly proportional to the final net proceeds. However, this does depend considerably on the housing market’s status at the time of the sale.
Choosing to rent or buy a property depends on very personal life characteristics, which is why making use of a professional, experienced real estate agent will surely save you many headaches throughout the whole process. Unsure whether to rent or buy? Looking for a property in Toronto or the Greater Toronto Area? Don’t hesitate to call Dmitri Alexandrovski of Shop A Property at 647-886-3462 to get the guidance you require.