This was a post I wrote earlier in this thread looking at my actual suite in Woodwards:
Quote:
Originally Posted by lowside67
To take an example, my current place in Woodwards. I'm in Gastown, 38th floor, 900sqft, 2BR unit looking straight at the water.
Rent = $2200/month
To buy, a reasonable expectation is to pay about $675k for this unit.
Assuming 20% down and 2.99% mortgage, this is going to cost you: $136,000 cash for the down payment, another $10k for transfer tax and legal fees. For round numbers, you need $150,000 cash in your bank account. Then on top of this, you are looking at a best case mortgage payment of $2313 over 30 years, then you add $412 for strata fees and $240 for property tax.
Own = $150k cash, $2965/month
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It would cost me nearly $10,000 in CASH every year out of my pocket to own instead of rent, which means at my current tax bracket, I need to earn over $14,000 per year more just to have the same amount of money left to live on each year.
After 5 years you have paid $140,000 towards your mortgage but it has gone down just $60,000 - the rest is interest. So if you want to sell your place and break even, it needs to have appreciated from $675k to $755k just to cover the interest. Another $10k in realtor fees and legal to sell it and now you need to get $765k to break even.
This is over 13% appreciation in 5 years which is pretty realistic but that means you took on all this risk to have the exact same amount as if you had've rented...
I don't believe that owning property is wrong, but it's just not the obvious slam dunk decision that some people seem to think it is... the real value in owning is the forced savings - you do have a bunch less cash every month but some portion of that will end up as "value" that you can access assuming nothing crashes whereas most people don't take the $700 difference between renting and a mortgage and just put it in a savings account...
Mark