well said
Itâs also harder to rent an actual detached home which is a pretty big deal when you have kids.
The idea that the mortgage needs to be less than the rent because then the homeowner will âloseâ money makes no sense. The mortgage includes an interest portion and a reduction of balance portion. If the rent was equal to the mortgage then the person renting would be an idiot because he would have been better off buying the home with a mortgage and accumulating equity.
Yes, but the idea here is that your downpaymentâs interest had you not bought a home would be making a return to offset such a difference, assuming it wouldnât just be sitting in the bank making 0.01% interest, which honestly is probably what a lot of people have it.
Weâll you are assuming that the owner that is renting the place out is willing to live with negative cash flows in order to build equity. Thatâs not always or even generally the case. yes I know real estate taxation and such is a whole different animal when you get into the various favorable tax treatments of rental property, at least in the US, I donât know about Canada, but still the owners tend to like generating positive cash flows and if the rents donât even cover the PI thatâs kind of difficult though not impossible if youâve got the right accountants and right tax structures in place.
Assume no downpayment or a very small one, if the rent was higher than the mortgage and you assumed price stability, then it is silly to rent. This is simple logic. You have the benefit of housing + partial ownership of the home.
Yes, that much is obvious.
If you have a 0-5% downpay and for some reason the rent equivalent is HIGHER, of course you should buy.
But that scenario is near impossible. Your monthly payment on a 0-5% down would be insane, especially because now you also have to pay mortgage insurance (in the US)
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I can walk to a grocery store from my small, cheap house, but itâs across a highway so I donât want to. Oddly, the neighborhood behind the grocery store is nicer, bigger houses.
I can walk to 7-11, the library, one of my favorite Mexican restaurants, and Little Caesars. I donât walk to those places though.
So . . . neither party is spending any money on maintenance and repairs for their dwelling in question?
In that space (I have a BIL that rents out properties), the rentalâs cost per unit for maintenance/repair could very likely be much less over the course of the mortgage payoff.
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as noted just above me, you ignore who bears the cost of repairs and material upkeep. roof, hvac, plumbing, electric panel, appliances. not all are small.
you assume everyone can qualify for a no down payment purchase.
you assume price stability which really narrows markets. even âstableâ markets saw a decrease (brief as it may have been) in 2008.
cost/work to exit the property are also a thing. so you have narrowed it more to those who def want to stay in that place.
i rent out a house (accidentally - was upside down after moving to a larger home in 2008 and just donât have an exit strategy still). current rent has at times been higher than what it would cost to own under your assumptions. (not at 7% rates, but under 5% it would be). going way back to when it first rented my mortgage was higher than what the rent was. your frictionless vacuum doesnât always exist.
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Thatâs cool but itâs still not true that rent has to be higher than the mortgage. And based on my calculations of the toronto market, there is absolutely no way that maintenance costs would be so high that it would have it better to rent. Also a lot of maintenance costs can be recovered because they usually increase the value of the home.
I was just coming up with a simple counterexample. Sure itâs not realistic but itâs just make my point that itâs not âobviousâ that rent should be higher than the mortgage.
They donât or else people would fix their houses up before selling them
Youâre lucky to get back 50 cents on the dollar spent on home improvements and maintenance
Flipping is a different story because that usually renders the home uninhabitable for a period of time
Toronto market is âonly going upâ because of mass immigration into Canada over the last 10 years.
That âmass immigrationâ is going to be drastically curtailed over the next few years.
What do you think that will do to house prices?
Sure and the returns have been better than the stock market by a wide margin.
Doesnât really matter if prices go up or down
If it goes up and they sell, they either need to down size, move somewhere cheaper, or take out a larger loan
I donât buy their argument. Home ownership is not a good financial investment
Not the US stock market.
Not even close.
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Yep. He already posted a nice self own showing the sp500 outperforming every Canadian residential market from now back to the inception of the study performed by rbc
Then cried about the free government subsidized leverage
Canadians. Pft. Have fun retiring
Dude, this is dishonest trash.