No matter who you talk to, it seems that everyone you know has some pretty strong opinions about Toronto real estate. If you’re asking for advice about whether to rent or buy a house, it’s also one of the rare times that people can come to a consensus.
Nearly everyone will tell you that it is better to buy a house whenever possible. Is it always true? Few things are truly black and white. There are nuances to any decision, and real estate is no different. In today’s post, we’ll dive deeper into the merits of buying and renting a home in Toronto.
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A Solid Case for Renting
Sometimes, buying a house just isn’t financially feasible, even if you dream of homeownership one day. In Toronto especially, real estate prices are quite high.
Renting is also expensive, but you don’t need nearly as much cash on hand as you do to get into the market. Buying a house anywhere requires at least a 5% down payment, plus closing costs. That’s $25,000 for a $500,000 condo. For rent, you typically just need first and last month’s rent.
Beyond a lower barrier to entry, there are other advantages to renting rather than owning.
- No long-term commitments: A typical lease is one year, with the option to renew or revert to a month-to-month term, depending on what you work out with the landlord.
- Little to no maintenance to worry about: While you are obligated to keep the property in decent condition, major repairs are the landlord’s responsibility.
- Strong legal protections: Ontario’s Residential Tenancy Act (RTA) is highly favourable to tenants.
Whether you buy or rent, you’ll want a location you love coming home to. The posts below might help you find your perfect neighbourhood!
- These Toronto Neighbourhoods are Perfect for a Fresh Start
- Up and Coming Neighbourhoods for Families
- Top Dog-Friendly Neighbourhoods in the West End
What You’re Missing By Renting
Renting instead of buying also comes with a few disadvantages. First and foremost, there’s the downside that everyone keeps telling you about. As a tenant, you are not building equity. If the rent is $3,000 a month, those funds are gone forever, which can also make it challenging to save for a house one day.
Lack of equity growth is the primary tangible downside of renting. Here are a few other things to consider.
- You might miss the joy and pride of homeownership: While you can hang your photos and artwork, it just never 100% feels like yours.
- Less freedom to renovate and remodel your home to your liking: You need approval before doing anything major. And if you do invest in improvements, it’s the landlord who reaps the financial reward, not you.
- Less security: What happens if you rent a condo or house and the landlord wants to sell or move back in? Even with all of your rights under the RTA, you can still be asked to vacate. A purpose-built rental building eliminates this risk, but not everyone is meant for apartment life.
Home Ownership Isn’t for Everyone
Homeownership has some advantages you can’t enjoy as a tenant. However, not everyone who can buy a house should buy a house. Before making that commitment, here are some considerations.
- Yes, you will build equity, eventually, but it takes time: The longer you stay in one place, the more potential for growth. In the short term, real estate values can fluctuate and even decrease.
- Owning a house can be more work than you realize: You’re in charge of maintaining the lawn and clearing the snow. If the furnace breaks down during a blizzard or the air conditioning quits at 35 degrees, there’s no landlord or property management company to call. You’ve got to make those arrangements on your own.
- You’re in it for the long haul: It’s not that you can’t move, but it’s more expensive and complicated to sell a house than to vacate a rental unit.
The Financial Potential of Buying a House
Owning a valuable financial asset and equity growth are the most obvious benefits of buying a house instead of renting. What many people don’t realize is how much you actually stand to gain as time goes by.
Housing values rise and fall. As with all investments, past performance is not a guarantee of future success. All the same, long-term demand for homes tends to outpace the supply.
If you plan to stay for 10 years or more, buying is nearly always the better choice. There’s an excellent chance that your property value will increase substantially.
In a worst-case scenario, even if it doesn’t, you are still coming out ahead financially because you will pay off your mortgage one day. When that happens, your biggest expense is a thing of the past. That is a benefit you can never expect when renting.
If you decide to buy, the advice below can help you get maximum value:
- 10 Mistakes Buyers Make and How To Avoid Them
- What Is Fractional Ownership in Toronto?
- What You Need To Know About Buying A House In A Changing Market
The Benefits of Homeownership Continue!
Beyond the financial reasons, there are other reasons to buy rather than rent.
- Greater peace of mind: You have a place that is truly yours. Living in a space you own has a different vibe than you experience as a tenant. You feel more settled and stable, and you never have to worry about the landlord asking you to leave or announcing a rent increase.
- You can make your home your own: Your name on the title gives you greater freedom to remodel as you please, within reason. You still need to obtain the applicable permits for major projects. However, you never have to worry about a landlord telling you “no” just because.
- You become part of a community: If you own your house, chances are, so do your neighbours. As you get to know the people in your area, you develop long-term connections and friendships.
Whether you decide to move forward tomorrow or a year from now, homeownership is a worthy goal for your future in most cases. When you’re ready, a local Toronto expert can help you find the perfect place to get your foothold on the property ladder.
Have you always wanted to buy a house and are wondering what might be possible? Reach out to us at erica@ericareddy.com or call 416.443.0300, and we are happy to answer any questions you may have.
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