Author Topic: Not sure if I should rent or buy in Vancouver. Do NOT want to commute anymore.  (Read 1574 times)

Fhigurethisout

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This is a cross-post from reddit. I’d love to hear some thoughts around here.

Link to the original thread: https://www.reddit.com/r/PersonalFinanceCanada/comments/8cfet0/stuck_between_options_for_living_downtown/dxfrizs/?context=3

I’ve seen Mr Money Moustache’s post about rent vs. buy, but we still essentially have three options.
(Here’s the original post:

Thanks in advanced for any advice!

Partner and I both work downtown Vancouver now, combined salary is about 100k-110k. No student loans etc. i can bring in an extra 12k with a small freelance gig that i enjoy, but have almost no time for it due to commute now.

EQUITY: Own a 1970's 2bd 1ba condo in the suburbs with ~90k left to pay. Told we can sell it for 400k or so (mom's partner is a realtor). The location is great if you're going to school/college or working in the suburbs.

COMMUTE: the commute to vancouver from here sucks with our hours (yeah i know, boo hoo, first world problem, but we have important personal goals). We are left with very little time for our health, relationship, personal goals to help move our careers along, etc. His commute can be up to 2-3 hours a day, and same with mine. We basically wake up at 5, go to work, come home by 6 or 7, cook dinner/chores/errands/maybe exercise, sleep by 9.30-10.

GOALS: Have definitely decided to move closer to our work places. Our goals are to further our careers and increase our incomes, which will require maximizing our time outside of work--completely possible if we are 15 min from work. Partner's health is also impacted by the long drive. we've found rentals like, right across from one of our work places and 10 min skytrain from mine.

If you are unfamiliar with Vancouver's market, it's est 800k for 2br 1ba. 1mil if we want something splashy. Maybe a 2br 2ba if we go with something old. Rentals are like 1500-1800 for a 1bd. 2br 1ba would be like 3k. (would prefer 2 bed cause i have a freelance gig which is nice to have some studio space for, but i think we'll just try to squeeze in a 1bd for affordability).

OPTION A: Sell condo, buy downtown. Mom is pro-buying--- she's one of those people that have done really well in Vancouver's market. So she wants us to either sell current condo and buy dt, or sell current condo and invest the money while renting downtown and see what happens in the market. NDP might cool things off a bit, i agree on this point. but by how much? hard to say.


OPTION B: Rent out current condo, rent downtown. If i can rent out my current place for ~1700, it can give us almost 1k off our rent downtown. So, if we take a rental for $2k or less, we'd be in a great spot. I don't think renting out my place will be an issue, as it's near a major college and transit. The negative is that, well, we could have months where we are paying both mortage and rent. That worries me a bit, but I'm leaning towards this option the most. I can't justify spending almost 1million on a tiny condo. We also don't know if we want to be 'stuck' downtown, in case of job changes. interestingly enough, my mom's realtor partner actually admitted this probably isn't a bad idea.

OPTION C: Sell, invest what's left, rent downtown.... and see what happens in the next year or two?

Thoughts? i'm trying to avoid traps like getting a huge mortgage that leaves us with very little money to travel and save. Option B seems good to me since we'd still have equity, and would be able to live downtown.

Freedomin5

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I would take option B. If your current condo is in a good location, you shouldn’t have any problems renting it out and vacancy should be low. Worse comes to worse and you can’t rent it out, just drop the rent a bit.

We are doing option B in the Toronto market. We haven’t had any vacant months in the past six years, but our unit is very well-kept in a high demand building. You do need to make sure you keep some cash on hand for repairs (e.g., we recently had to replace the washer). But with a salary of $100K and a frugal lifestyle that shouldn’t be a problem.

We also make sure that we can cover both rent and mortgage, just in case. Also, if you only have $90K left on your mortgage, you can always either pre-pay as much as possible now so you won’t owe as much when you start renting (though probably not a good idea if your mortgage rate is low), or you can drop to minimum payments if you’re between tenants.

frugaliknowit

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A or C.  Not worth the risk to have a mortgage plus a rental lease; too much has to go right and too much can go wrong. 
« Last Edit: April 19, 2018, 09:25:09 AM by frugaliknowit »

Zikoris

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Option C in a heartbeat, from a fellow Vancouverite. It also has the benefit of being completely maintenence and effort free, which seems wuite valuable if you want to focus on other things.

TrMama

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C is a very bad plan. It opens you up to the risk of being renovicted which introduces financial and physical instability into your life. It also puts you at risk of being priced out of the market if you decide you want to get back in later. Which you might, when you get tired of being sheltered only at the whim of your landlord.

I would do A or C, depending on how interested you are in being a landlord and whether you have the down payment money you'll need without selling your current condo.

Stop looking at your dwelling as an investment. It's a place to live. It gives you security and stability. Even with the current political shenanigans, property in downtown Vancouver will continue to be more valuable than elsewhere in the province and more valuable than in many places around the world. Even if the RE market goes down for a while, it won't matter to you because you're planning on staying there for 10+ years. Right?

tralfamadorian

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Definitely C.

Your rent vs buy puts you soundly in a rental from a profitability standpoint. Also, Vancouver's not my market but I have been hearing lots of noise suggesting that it is due for a correction. Most recent one here: https://www.realwealthnetwork.com/learn/canadian-housing-bubble-loans-reset/

In a more balanced market, I would be all over option B but not with the buy vs. rent figures that you listed.

Freedomin5

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Yeah, there’s noise of a correction in Toronto too. In hot markets like Toronto and Vancouver, a “correction” often means that the prices stagnate a bit and don’t go up as fast. In high demand neighborhoods or buildings, units tend to hold their value and don’t drop. So selling and waiting for prices to drop in a good building in a good neighborhood is unlikely to happen.

Either sell and become long term renters and risk being priced out of the market, or find some way to keep your foot in the RE market. Honestly, my family has been buying units in Toronto and renting them out (nothing fancy, just your small private landlord), for the past 25 years (my parents did this as an investment strategy). Haven’t gone more than a month without a renter. If your unit is well-kept, in a good location, and competitively priced, there will always be someone willing to rent it.

As others have mentioned, this might not make you the MOST money, but sometimes there are other considerations (like not wanting to be priced out of the market and being forced to be forever renters).

damyst

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Great move, whichever way you spin it.

As others have noted, you don't necessarily need to be within the downtown peninsula to find what you're after. I'm renting south of False Creek just across the bridge (2bd 2br for $2,000 - that's probably on the low side of the market right now, but I know people who pay even less). My commute downtown takes 15 minutes by bicycle or bus.

With property prices so detached from fundamentals, I don't think buying would be a good deal. For my part, I'm not worried about being "priced out". Fun anecdote: I had a look at the 5-year assessed value history for the condo I'm renting. The property value shot up 52%. Well, the S&P 500 went up by almost the same amount. Once you add in rental income and deduct property taxes and other costs, I *think* my landlord is better off vs. where he would be if he'd sold the condo in 2013 and put the money in index funds, but it's not a slam dunk.

MMM advocates flexibility over illusory safety. When it comes to housing, for many people it means choosing to rent rather than buy, particularly in a market such as this.
« Last Edit: April 21, 2018, 12:42:31 PM by damyst »

PNW

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10000% option C. Fellow Vancouverite here. Option B is too much risk, plus the PITA of being a landlord. But you also don't want to buy a condo DT or near DT Van right now - way too expensive now and ultimately it's just a concrete box that starts deteriorating from day 1. Yeah renting is not always fun and not as stable, but flexibility is valuable too. Sorry to say but don't listen to mom - timing is everything and things ain't what they used to be in Van.