Whether your rent your apartment or buy a condominium, you are certainly spending money every month on your living expenses. The question many first time homebuyers pose to themselves is, Should I rent or buy? Calculating some of the following factors will help you determine which move is smarter – tenant or homeowner. Look at comparable properties for renting or buying – compare homes of the exact same size and location to make it fair – and calculate the following:
- Rental Rate and Mortgage Rate: What is the home price? Determine your monthly mortgage and determine the monthly rent price for a comparable property. Remember to deduct the principal portion of your mortgage payment, as this operates like a savings account when you go to sell your home.
- Length of Residency: Consider how long you are going to stay in your residence. If this is a short-term home for you, renting will most certainly be better. Otherwise, factor in your area’s home price growth rate and investment return rate to see what the return on your dollar could potentially be as a homeowner.
- Property Taxes: This is for homebuyers only. You May Enjoy this article about Vancouver’s Property Transfer Taxes
- Closing Costs: Again, this one is for homebuyers only.
- Down Payment: How much are you going to put down for your home? If you are a first time homebuyer read this!
- Security Deposit/Broker’s Fee: For renters only. Factor in that this will be returned to you upon vacating your property. Do you need to pay a broker’s fee for finding you a rental property?
- Maintenance: Beyond basic maintenance, upgrades (which falls under the maintenance category) for homes are typically associated with wanting a higher standard of living. As landlords do not typically upgrade rental units while occupied, consider that your home does not need to be upgraded either. If the home you are looking to rent has upgraded fixtures, that “maintenance” cost is likely already factored into the rent.
- Insurance: Renters vs. Homeowners. Get a quote for each based on the size and type of property you are looking at.
- Utilities: What do you pay now for utilities? Are some expenses covered by a landlord? Do you currently have a roommate? Consider these questions when determining the cost for utilities at a home versus a rental.
- HOA/Common Fees: Are there any fees for this property?
Once you have put pencil to paper and calculated your costs, you may have a better picture of what the true cost of buying is versus renting. By evaluating your needs and what you are comfortable spending each month, you should be able to answer the question as to whether you should rent or buy.
Keep in mind that with buying, there are initial costs such as the down payment and the closing costs. There are also recurring costs such as mortgage, condominium or HOA fees, maintenance, property taxes, and insurance. If you are buying, you are investing your money in your home and the goal is that the net proceeds when you sell your house will be enough profit to cover not only the cost of your home, but the recurring costs as well. With renting, the math is a bit easier. Your initial costs are security deposit (refundable when you move) and any broker or finder’s fees. Your recurring costs are the monthly rent, utilities, and renter’s insurance. Some renters choose to invest their money elsewhere and the net proceeds can be beneficial, without the hassle of trying to sell a home.
There is no one right answer for everyone. It is up to you to determine where, and how, you want to call a house your home. Regardless of whether you are renting or buying your next home – let Crescent Moving help take the heavy lifting out of your moving day. Contact us for a free – in-house moving quote withing greater Vancouver. Not moving to Vancouver? No problem – fill out our online moving estimate form for a quick and easy moving quote.