Would-be buyers and renters can while away hours by Googling the term “buy or rent calculator” and working through various scenarios.
However, the majority of home buyers aren’t thinking about the return on investment on an asset, they’re looking for a place to raise a family, close to schools and shopping, maybe with a yard, a deck for the barbecue and a basketball hoop on the garage: a place to call home.
These misty-eyed buyers might do better than you imagine.
Consider thatNorth Vancouverlisting with the high price-to-rent ratio and low yield. If they were to rent at $2,200 a month with annual rent increases of two per cent, they’d pay $289,072 over 10 years.
If they could come up with $162,500 (for 25 per cent down) and borrow $480,000 at today’s historically low rate of three per cent (and pay $900 a year on upkeep), they’d pay $281,589.
If the house appreciated by seven per cent a year and the cost of selling it was seven per cent, the appreciation value would be $1,278,451. They’d come out ahead by $867,080.
It would take a savvy investor to beat that under current stock, bond, currency or commodity market conditions. At the same time, it is risky to have so much capital tied up in a single immovable and relatively illiquid asset.
In the final analysis, whether it is better to buy or to rent depends not so much on interest rates and ratios but rather on an individual’s goals in life. For some, home ownership is a ball and chain; for others, it is fulfilment of a dream.
Odds are that if you’re asking the question, you’ve already made up your mind.
Read more: http://www.vancouversun.com/business/rent+that+question/5595374/story.html#ixzz1boKhwHuz