Another important point that needs to be made is that the returns to real estate, at least in Canada, have not been very volatile. If the avg return on asset A is the same as asset B but with much lower variance than asset A is a super investment. It’s just silly to compare two investments over a long period based solely on the avg return.
You can see from that RBC report that real estate has been less volatile than the stock market.
Not sure I agree with this. When there is inflation, interest rates go up and that is generally bad for real estate.
The problem with a vacation home is that homes need to be maintained. That’s a bit of a nuisance if you live in them, but much more of a nuisance if you don’t.
Yes, I’d want to know a good handyman that i could call up for the small things. There are also plenty of services that could be set up to take care of all of this for their oversized cut of profit.
A lot of the scenic remote lakes and mountains where people like vacation homes aren’t well-serviced by organizations to do maintenance. This has been an issue for members of my family with vacation homes.
The assumptions used here are not realistic. The rent is lower than the mortgage payment. So your example is basically “investing in an asset with lower cost provides greater return than alternative that has higher costs”. Duh.
To even begin to make it a realistic comparison of the impact of ownership, the rent needs to be based on what would it cost to rent the same house you’re buying. So in other words, take the same mortgage payment and gross it up 25%/50%/etc. for the landlord’s cut.
And also, ignoring maintenance expenses of owning is extremely unrealistic. Those are material costs of home ownership that are either significantly reduced or eliminated while renting.
I think any place that I would consider would need to be reasonably close…where I could jump in a car in the morning and be there around lunch, which is really at most about a 400 mile radius. More from the perspective that I’d want to actually use the place and not just maintain a rental. That won’t help with a leaky faucet or other small fixes that I am plenty capable of handling, but I could get there regularly on a free weekend if it is not in use.
I literally used historical data from the Toronto market… Like I said: real estate in Canada has been a very good investment, much better than the stock market.
And of course the rent is lower the mortgage payment, that is how it should be. The mortgage payment includes a reduction of principal.
Explain to me why a landlord with a mortgage would charge a tenant lower rent than that mortgage.
Because his landlord is his mommy
Don’t feed the troll (most likely he’s just a kid without much real world knowledge of the strain of homeownership compared to me doing absolutely fuck all for my financial investments in low fee ETFs)
I don’t think he’s a troll.
There are some valid points he makes.
Yes he certainly won’t stop bringing them up but that still doesn’t change my mind that it makes this a better investment
That’s fine. But calling them a troll with the intention of silencing her viewpoints doesn’t seem that conducive to a good discussion.
because the market sets the rent and it doesn’t care about the landlord’s debt structure?
i get why the landlord doesn’t WANT to charge lower than the mortgage and other expenses, but one of the largest expenses for a landlord can be vacancy.
And since interest rates have gone up, it is common to have monthly payments that are lower for rent than for mortgage (median mortgage $2199 vs median rent $1978)
Wouldn’t that make home ownership even more attractive?
Also, what you’re wanting to rent versus what you want to own often are not apples to apples comparisons.
I was paying around 3k a month when I was renting. Now I pay around 4.6k (including HOA, taxes and insurance) for owning, but my place is 300sqft larger. And while I can compare renting a place my size of equal quality (which would probably be around 4.6k in rent), there’s no way I’d be willing to pay that much for just a rental. I have more mental leniency for “extra space” when I own versus when I rent.
It’s quite normal to own a nicer home than you would be willing to rent.
Apples-to-apples comparisons are possible, at least for lower value homes. But if you start with a more real-world comparison of owning a nicer home vs renting a less-nice home, that will skew the numbers towards renting.
Yup, and this goes back to the intangible value of owning we were talking about earlier.
Right… it just seemed like Garth was lodging a complaint that stochiki’s analysis (which I guess showed owning was better? Or at least pretty darn good?) was flawed because the mortgage payment was more than the rent.
If you fixed that “problem” to make the comparison more apples-to-apples then that would make home-ownership even more attractive than stochiki was claiming.
(There may be other problems with his numbers; I didn’t run a full analysis.)