I’m going to throw it right out there. I’m a renter in my thirties. Please control your shock and horror and resist your urge to try and make me understand that this is a terrible financial mistake.
I’ve heard all of the arguments in favour of buying a home many times before. Over dinner on first dates, while having drinks with friends and at every family event for the last ten years. According to the ‘Toronto Life’ two million is the new one million in Toronto real estate. The truth of the matter is, as a single person living in Toronto who is not making six figures, I actually can’t afford to buy my own place. You would think that this Torontonian financial candour would end the conversation right there but it doesn’t.
What About Life in the Suburbs?
There are always the suggestions that I move out of the city to say, Brampton or Caledon like one of my friends did recently and commute. Not an option... ever. Or buy a fixer upper in say, Barrie then do it up and rent it out. Not an option since I’m not Handy Manny. My old school aunt, bless her, even suggested that I ‘shack up’ just for the second income and a shot at the property ladder before it’s too late.
Renting vs Buying a Condo
Another suggestion I often hear is, “buy a condo!” One of those fancy shoe boxes in the sky. To be honest, I have thought of that and even looked into it. Almost threw down everything I have to put a deposit on a pre-construction unit. Only this one was a baby shoe box and was so low down you could likely see into it from the street, like those lower units that sit on the Gardiner.
But I have to tell you that once I sat down and did the numbers I was genuinely terrified. Sheer fear. I hadn’t even signed for anything and suddenly rising interest rates and unemployment rates were all I could think of. After the mortgage payment, condo fee and property taxes, I would have been left with less than what I need to cover basic expenses. That pesky condo fee! And that was just for the basic finishes. Imagine the shame of not having stainless steel appliances or granite countertops in my new build! I was assured by the sales agent that I would absolutely qualify for a mortgage. Oh, how I laughed and cried simultaneously. Perhaps I could have pulled it off but then I would spend the next 20 years house poor, and for what? The pride of ownership? Getting second dates and having my friends and family then move onto my perpetual single status and childlessness? No thanks.
Rather than increase my financial well-being and standard of living, in my case, buying would almost certainly lead to debt problems since all I would have in the case of an emergency or for some of my basic needs would be my MasterCard. As a renter, I have my own place that is at least twice as big as the condo unit I was looking at, and I can afford a life! I can afford to go on vacation, save for emergencies and retirement and even save for a down payment should my want to live in Toronto change. I’ve seen some very technical calculations on how buying a home is better financially than renting in the long-term, and for those who can afford to pay their mortgage and property taxes, save for retirement and emergencies and actually still eat, then I’m sure buying is the best decision for them.
Crunching the Numbers and Co-Op Living
Being a renter does not mean that I’m poor or financially illiterate, it means that I’m building assets that are not property. If I was condo poor, that condo would be all I had in the world and when I retired, my state pension would barely cover property tax and condo fees. Also, if I find Mr. Right how am I meant to fit him into 450 square feet? What it would cost me to sell a condo after a few years of living in it is a whole new topic.
Some experts have done calculations on how much you’d save over five years if you rented instead of buying a condo. Some have a realistic interest calculations at 1.25 percent in a high interest account, while others randomly suggest 6 percent over five years in a mutual fund or some other investment with risk. At $370 a month you would end up with $22,894.
That’s nice but you really want more than $370 per month, if not just to make you feel better about getting harangued on a weekly basis over your housing choice. I actually save twice as much per month renting when I compare with the pre-construction unit I looked at. How do I do this? Co-op living. Why pay for someone else’s dream in the sky and then have them boot you out when they feel like it or crank up your rent when your lease expires when you can live in a community where people actually know your name and where you make the decisions regarding your home. Renting is a very affordable option in Toronto when you consider Co-Op living.
I could talk about this topic all day and haven’t even scratched the surface so I’ll end it here and happily chat it out with anyone who wants to continue this in the comments. Go easy on me though! To any fellow young city folk out there, if you’re considering a condo you need to do a monthly budget before you even sit in front of a savvy sales agent. If budgeting isn’t your strong point then have one of our financial coaches help you out. Give us a call at 1.800.267.2272.