Author Topic: Buy a condo or keep renting?  (Read 8483 times)

Zikoris

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Buy a condo or keep renting?
« on: February 16, 2013, 05:00:25 PM »
Hoping the mustachians can help up make a decision!

My boyfriend and I are considering buying a small condo near our current apartment. We currently pay $732/month rent, utilities included, plus $183/year for renters insurance. The condo development we're considering is $225,000, with non-mortgage monthly fees(utilities, taxes, strata, etc) at around $200-$220. Mortgage payments would be around $1100-$1200. The development has very sparse amenities, no interior hallways, parking is sold separately, and the units are very tiny, which is fine with us and contributes to the low price(almost unheard of in Vancouver).

We're trying to figure out if this is a good financial move or if we're better off continuing to rent in the long term, and if we buy, how possibly much it would delay our early retirement goals by. Any advice?

arebelspy

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Re: Buy a condo or keep renting?
« Reply #1 on: February 16, 2013, 05:41:11 PM »
Those numbers sound like it's much, much better to keep renting to me, but run one of the buy versus rent calculators (this is a good one, IMO: www.nytimes.com/interactive/business/buy-rent-calculator.html) with more specific numbers to your situation.
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Another Reader

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Re: Buy a condo or keep renting?
« Reply #2 on: February 16, 2013, 05:49:54 PM »
Why would you think this is a good financial move?

On the surface, it looks like something I would not do.  I would be getting a bottom-end unit with no amenities.  I would pay somewhere between $1,300 and $1,420 for the privilege of living in this unit, up to almost twice what I am paying now.  I would be buying it with someone to whom I am not married, with no stated plan for the situation where the relationship ends.  I'm in one of the most expensive markets in the world that has run up dramatically over the last few years and a lot of folks think has topped out. 

In your shoes, I would continue to rent, max out savings, and figure out where the relationship with the boyfriend is going.

Karl

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Re: Buy a condo or keep renting?
« Reply #3 on: February 16, 2013, 05:50:19 PM »
When renting and owning costs diverge substantially, price changes usually follow (one increases, the other decreases, or both).  So, part of the decision comes down to if you think residential real estate is over-priced.  If it is, wait until the value drops.  If you think rentals are not charging as much as they "should," then purchasing provides you some long-run protection.

That said, my personal opinion is that I would not wish to purchase a condominium as (like mobile homes) they often end up having decreasing value over time. 

An additional point is that in my area of the US, the laws are quite clear about splitting property when a marriage ends and murky when a non-married couple purchases together and (unfortunately) the relationship ends.  I hope your relationship stays healthy and happy for many decades to come, but I also realize that most relationships end up failing and it makes sense to protect everyone involved through clearly written agreements regarding any joining owned property.

I wish you and your boyfriend good luck with this decision.

Zikoris

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Re: Buy a condo or keep renting?
« Reply #4 on: February 16, 2013, 06:12:11 PM »
Thank you guys for the feedback! Personally, I'm more inclined towards renting long term for the sake of flexibility, and not having to deal with crap like repairs, but want to do whatever makes more sense financially ultimately. We're not planning to leave Vancouver until possibly long after retirement - probably not, but when we're quite old we might want to go live on a beach somewhere cheap.

We haven't run the numbers, since we're not completely sure how to calculate it, but our thinking was that after the mortgage is gone, our monthly home costs would be very low - $200-$300 - which could help a lot in retirement. However, our monthly costs up until that point would be up to double. Neither of us has owned property before, so I imagine there are hidden costs or whatnot that we don't realize.

icefr

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Re: Buy a condo or keep renting?
« Reply #5 on: February 16, 2013, 06:15:54 PM »
With buying, you can't just look at the mortgage payment. You also need to look at the strata fees and property taxes. That means that your monthly carrying cost would be $1,300-1,400, plus your insurance will go up. I was paying ~$100/year for renter's insurance and am now paying ~$200/year for condo owner's insurance. So buying would require tying up $45,000 of your own cash, playing closing costs, moving, and then paying double what you're paying now each month. You also have no idea what interest rates would look like in 5-10 years when you have to renew your mortgage.

I understand the interest in owning, but I went from paying $X/month in rent last year for a 700 sqft apartment to paying $X/month in carrying costs for a 1200 sqft condo with a second bedroom and I'm now paying less than that since refinancing. I couldn't fathom going from $X/month in rent to $2X/month in rent for a comparable unit. When you buy, you want to buy a place that will last you, life-wise, for at least 5 years. Would a tiny condo do that for you?

I would also be super, super hesitant to buy a place with someone who I am not already legally tied to. Do you guys plan on getting married at some point?

I would consider buying a place like this IF I could pay cash for it and I planned on living in it forever. Since then, your monthly carrying costs would be cheaper than renting no matter what.

Zikoris

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Re: Buy a condo or keep renting?
« Reply #6 on: February 16, 2013, 06:25:50 PM »
We would be fine living in a tiny place - it's actually bigger than our first apartment together(when he moved in with me I was in a 300 s/f bachelor suite), and we're very minimalistic and don't want kids. We're not planning on marriage - I'm inherently anti-marriage for various reasons - but we've been together for several years and discussed the future extensively.

It looks like the consensus is to keep renting - I had a feeling renting was the best financial move, but wasn't entirely sure. Works for me, I enjoy renting and feel no need to buy unless it's the best financial move. We also currently live in a housing co-op that charges extremely low rent(about 1/2 what comparable places nearby do) and raises it only if needed to cover utility costs or such, so our rent increases much much slower than regular apartments.

Le Dérisoire

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Re: Buy a condo or keep renting?
« Reply #7 on: February 18, 2013, 03:05:19 PM »
Please, please, please don't buy a condo in Vancouver now. Or in any city in Canada for that matter...

This 225 000 $ condo will be worth 175 000 $ in a year or two. You can buy it then.

http://seekingalpha.com/article/342021-canadian-housing-market-collapse-part-i
http://seekingalpha.com/article/342031-canadian-housing-market-collapse-part-ii