The one factor you left out about savings with your monthly rent payment vs mortgage payment is that you pay income tax on the accumulated interest on those savings with other investments. When investing in a house that gained value…you don’t pay any tax (personal or capital tax) when you sell it.
Nice breakdown. It's a big IF you are able to sustain that living arrangement for 7 years. Think back where your life was in March 2016, would you want to be in the exact same place with your work, social group and relationship today?
Thanks for the comment. It’s true. 7 years is the top end of people staying in a home… typically we find it’s the range of 5-7 because after 5 years they can be ready to change and sometimes it can take 1-2 years to find a perfect next home.
At time of shooting this was a rate offered for 5 yr fixed. When the bond rate moves like it has lately the rate today and in the future will be different.
In my opinion/experience Don’t buy a house if 1-you don’t have 6 months emergency Fund 2- A good down payment 3- if not sure you will stay in the house for 5 years + 4- don’t buy something if you can’t sleep at night 5- no house 🏡 is dream house you will change your mind again and again 😅
Great video! I ran your numbers with assumptions. Looks like the net worth of the Renter in 7 years will be $170,217 ish and Buyer will be at $137,106 ish, comparing both will have $310,000 to play with over a 7 year period. In my personal opinion real state will be on decline for at least 3 more years so in 7 years from now prices should be about the same as they are now, if that happens, buyers (with video assumptions) would have lost the opportunity to keep 1449.86x7 years = $121,788.24 .... in that scenario renter networth will be at $170k and buyer sadly $15k.
@@Livingrick it depends on your personal situation. Purpose for purchase, loan amount, repayment period, etc. I good rental deal goes long ways. Also, if you pay in full and no loans outstanding.
I would agree with you that real estate was in a decline in most of Canada, however Calgary is sitting in a different boat. Not sure for how long, but time will tell...
@@Livingrick if a house is fully paid off the cost of ownership is home insurance+property taxes + maintenance. So around $11,000/y on a $500,000 house that doesn’t need much maintenance. You can assume house values go up around 3% per year in the long term. However l, if you buy on a peak period house values will slowly decrease until there is another economical boom. Also remember that Costs of selling vary from $20-$30k. Be careful and happy shopping!
As a landlords that "owns" and rents out a townhouse: The landlord is the debt holder. The landlord takes all the risk. I rent a townhouse for $1700. From that $1700 the government taxes 25%. The mortgage I pay is $2000 a month. I also pay $145 a month for property tax. My last renter caused $6000 in damages. That was all my savings I had to use to cover. After my renter pays $1700 to me I still have to pay $600 a month for them to live there. In the 9 years I have "owned" it I have paid about $55,000 in INTEREST PAYMENTS to the bank. And it costs me $1500 a year for insurance. If any thing else happens like more rate increases I could lose everything on a 9 year investment. Renters really need to learn this. Renting isn't all that bad most of the time.
I get it. We’ve had rentals that have done the same. Sounds like we should chat and selling and see if freeing up that cash if the monthly expense isn’t worth it.
all was good till the 7 year appreciation adjusted to inflation came up. The real estate in AB has been flat or negative for the last 10 years. Except pre/post pandemic era which is an anomaly. Condos & townhouses can’t even make up with inflation and have shown negative growth over the years. Detached homes barely break even with inflation. Right now realtors are giving us last 2 years data and making assumptions on that.
Thanks for commenting. The last two years were different for sure. But the previous years we didn’t see the population growth that we are seeing now and economists are projecting for the future. So I think it’s fair to say that there will be more growth over the coming 7 years then what we saw previously.
I just did this calc for myself a few months ago. Short term though..We'll be buying next year so putting our saving in the market didn't make sense. GICs at 4-5%ish right now. We pay way less in rent, and we'll probably have to pay more than $500k. So obviously a slightly different scenario. Good video 👍
Truly depends on your situation and good on you for doing your numbers!!! If we can help in any way over the coming year, we're hear to help and give second opinions! info@chamberlaingroup.ca
I think you should add to this. If you don't have that 15 percent down, do not buy or you'll be house poor forever and will be a hostage to your mortgage. Selling will eat up any equity you have so you'll be stuck for 20 years. Not that CMHC is helping with new qualifying rates. I'd really like it if you would make a video for those new buyers with the same numbers, but based on like 5% down and why you should never do that. Because new buyers will just look at this vid and say "oh, we should totally buy" but not know how treacherous the difference between 5/50 and 15/20 percent down is.
Trying to predict the future is always frivolous, so don't base your decision on that. As a home owner who has a paid off mortgage, I would like to give some advice... The most important advice I can give is to live below your means. If you're living with your parents, buy a cheap apartment in a good area and get a renter. Pay as much as you can into the mortgage + put 100% of the rental income into the mortgage. When it's paid off, buy another cheap apartment in a good area, paying as much as you can, plus the rental from the first and second apartment. Bad decisions are easy, and good decisions are hard. Making the hard decisions often ensures success.
Great advice for those that can pull it off... Many we talk to don't have the option of a free place to live while having a home they own to be paid off by a renter.
@@TheresaEnglish if he gave advice on doing a TFSA investment then that could have been great advice too… part of life is figuring out what you want to spend your energy on and for some that will be a house investment and others will see more benefit from stocks and trading. Neither are wrong and both can be right for the right person. How have you invested? Did you go the TFSA route?
Hey, good attempt at putting together the video and comparison numbers, there a few places you are off: 1. For the return on the investors down payment ROI we need to use compounding growth. So, $76,925 invested in the S&P 500 compounding at 10.22%/ year for 7 years = $152,016. This means an expected profit of $75,091 for the renter, not $40,954 as you stated. 2. Your maintenance costs estimate is too low. According to Scotia bank you need to use the “1% rule," which, unsurprisingly, says that homeowners should set aside 1% of your home's purchase price annually for home maintenance. *in this case you paid $500,000 for your home, you'd budget $5,000 per year for maintenance or $416 per month before inflation adjusting the figure. 3. For the home owner you state that the monthly growth rate on the house after 7 years will be $1,449,86 per month implying an annual inflation rate of just under 3.2% of the next 7 years - can you share with us the source of this estimate. 4. The difference between the rental costs and the ownership costs favors the renter before you adjust for inflation growth on the home value. you need to take the difference and add it to the S&P 500 investment monthly too. Therefore, 76,925 + $622 per month for 7 years at 10.22% interest per year = $227,225 ... renting is cheaper ...
Thanks for the comment... 1) This is the calculator used www.bankofcanada.ca/rates/related/investment-calculator/ it takes inflation into account and gives the future value of an investment. 2) Maintenance costs are subject to the property and quality that is purchased. $25,000+ over 7 years should be able to cover most issues that arise on a well-bought $500k home 3) As explained in the video, this is the average of the last 60 years of inflation
I personally think you did great job on explaining things but, regardless of that there are numbers of people who agree and disagree with all that you just said. And that's a human nature,some people calculate tight numbers some don't. Some people will buy house on tight budget but on top of that they go and lease 80 k pick up truck or SUV or big boat because how they gonna look next to nabour who has toys in front of his house. I still think buying is the way to go vs renting if you are in position to do so. Great analysis 👍
Thanks for taking time to comment. If you are looking to do this, as buying in a corporation is not easy now, it would be best to chat directly. Info@chamberlaingroup.ca
No corporation should buy family houses. This should be banned; houses are for families, not businesses, and business ownership would inflate the home market.
Great video! You mentioned internet in there somewhere which you could leave out. For the renter...you may add 30.5% effective tax rate to the investment in stock market! All in all the number in buying should be even better than you suggested so this is a great video as it's a more concervative number. To proof buying is better than renting use actual historical data then this will make even more sense! Then theres also the power of refinancing...you could pull that $80 000 out in the future and your salary increase over 7 years will match the new repayment...you can even lock in lower after 5 years... doesnt matter how you crunch this buying always makes sense...well done on thia video!
I know this is subjective but ain’t no way in hell would I move to those neighbourhoods! You need to take 2 vacation days, pack a lunch and bring your passport when you go that far to visit .😂😂😂
Thanks for the comment and watching. This wasn’t a video about these areas, it was more about buying vs renting. If you’re living in Airdrie, someone in Cranston may think the same thing for you 😂 😉
Do you really think the government can control inflation? Seriously? More money has been created in the past 4 years, then all money combined in the existence of the dollar. Government and it's agencies have never been bigger. Inflation (real inflation that affects every day consumers) is going up and up. Let's be honest with ourselves.
15 year mortgage making $650'000/year... pays for a $320'000 house. there are more then +30'000 laws in the country, so if the costs don't line up its because they are braking civil structure laws.
My friend in Cranston made more money on his house than he has working in the last 5 years. With the hundreds of thousands he has made selling he paid no tax. Canada is funny. So much debt being created...for nothing.
The one factor you left out about savings with your monthly rent payment vs mortgage payment is that you pay income tax on the accumulated interest on those savings with other investments. When investing in a house that gained value…you don’t pay any tax (personal or capital tax) when you sell it.
Nice breakdown.
It's a big IF you are able to sustain that living arrangement for 7 years.
Think back where your life was in March 2016, would you want to be in the exact same place with your work, social group and relationship today?
Thanks for the comment. It’s true. 7 years is the top end of people staying in a home… typically we find it’s the range of 5-7 because after 5 years they can be ready to change and sometimes it can take 1-2 years to find a perfect next home.
Where did you get 4.4% for a 5 year fixed? The rates now are around 5.4% on a 5 year fixed over 25 years with 20% down.
At time of shooting this was a rate offered for 5 yr fixed. When the bond rate moves like it has lately the rate today and in the future will be different.
You need a better broker if they are offering 5.4%.
In my opinion/experience
Don’t buy a house if
1-you don’t have 6 months emergency Fund
2- A good down payment
3- if not sure you will stay in the house for 5 years +
4- don’t buy something if you can’t sleep at night
5- no house 🏡 is dream house you will change your mind again and again 😅
All excellent points to consider 🙌 thanks for taking the time to comment and watch. Truly appreciate it 🙏🏼
Great video! I ran your numbers with assumptions. Looks like the net worth of the Renter in 7 years will be $170,217 ish and Buyer will be at $137,106 ish, comparing both will have $310,000 to play with over a 7 year period. In my personal opinion real state will be on decline for at least 3 more years so in 7 years from now prices should be about the same as they are now, if that happens, buyers (with video assumptions) would have lost the opportunity to keep 1449.86x7 years = $121,788.24 .... in that scenario renter networth will be at $170k and buyer sadly $15k.
To clarify should I buy or rent?😅
@@Livingrick it depends on your personal situation. Purpose for purchase, loan amount, repayment period, etc. I good rental deal goes long ways. Also, if you pay in full and no loans outstanding.
I would agree with you that real estate was in a decline in most of Canada, however Calgary is sitting in a different boat. Not sure for how long, but time will tell...
Let's say I have enough money to buy a house to live in out of pocket. Do I buy the house in full or just rent it out🤔
@@Livingrick if a house is fully paid off the cost of ownership is home insurance+property taxes + maintenance. So around $11,000/y on a $500,000 house that doesn’t need much maintenance. You can assume house values go up around 3% per year in the long term. However l, if you buy on a peak period house values will slowly decrease until there is another economical boom. Also remember that Costs of selling vary from $20-$30k.
Be careful and happy shopping!
As a landlords that "owns" and rents out a townhouse:
The landlord is the debt holder. The landlord takes all the risk. I rent a townhouse for $1700. From that $1700 the government taxes 25%. The mortgage I pay is $2000 a month. I also pay $145 a month for property tax.
My last renter caused $6000 in damages. That was all my savings I had to use to cover. After my renter pays $1700 to me I still have to pay $600 a month for them to live there. In the 9 years I have "owned" it I have paid about $55,000 in INTEREST PAYMENTS to the bank. And it costs me $1500 a year for insurance. If any thing else happens like more rate increases I could lose everything on a 9 year investment. Renters really need to learn this. Renting isn't all that bad most of the time.
I get it. We’ve had rentals that have done the same. Sounds like we should chat and selling and see if freeing up that cash if the monthly expense isn’t worth it.
Thanks for sharing the information
Thanks for taking time to comment and watching!
all was good till the 7 year appreciation adjusted to inflation came up. The real estate in AB has been flat or negative for the last 10 years. Except pre/post pandemic era which is an anomaly. Condos & townhouses can’t even make up with inflation and have shown negative growth over the years. Detached homes barely break even with inflation. Right now realtors are giving us last 2 years data and making assumptions on that.
Thanks for commenting. The last two years were different for sure. But the previous years we didn’t see the population growth that we are seeing now and economists are projecting for the future. So I think it’s fair to say that there will be more growth over the coming 7 years then what we saw previously.
I just did this calc for myself a few months ago. Short term though..We'll be buying next year so putting our saving in the market didn't make sense. GICs at 4-5%ish right now. We pay way less in rent, and we'll probably have to pay more than $500k. So obviously a slightly different scenario. Good video 👍
Truly depends on your situation and good on you for doing your numbers!!! If we can help in any way over the coming year, we're hear to help and give second opinions! info@chamberlaingroup.ca
Are people getting 4.4% fixed rates for 4years these days? Its not the scene in ontario
At recording we found some posted rates as mentioned in the video at 5 years.
U are great. Thanks for your videos.
You're welcome... thanks for taking the time to comment and watch.
I think you should add to this. If you don't have that 15 percent down, do not buy or you'll be house poor forever and will be a hostage to your mortgage. Selling will eat up any equity you have so you'll be stuck for 20 years. Not that CMHC is helping with new qualifying rates. I'd really like it if you would make a video for those new buyers with the same numbers, but based on like 5% down and why you should never do that. Because new buyers will just look at this vid and say "oh, we should totally buy" but not know how treacherous the difference between 5/50 and 15/20 percent down is.
Because nobody under 35 has $80,000 in pocket these days.
Thanks for the comment. I’ll run the numbers if it was 5% down and post the results in our story at @chamberlaingroup on instagram this week.
Trying to predict the future is always frivolous, so don't base your decision on that. As a home owner who has a paid off mortgage, I would like to give some advice... The most important advice I can give is to live below your means. If you're living with your parents, buy a cheap apartment in a good area and get a renter. Pay as much as you can into the mortgage + put 100% of the rental income into the mortgage. When it's paid off, buy another cheap apartment in a good area, paying as much as you can, plus the rental from the first and second apartment.
Bad decisions are easy, and good decisions are hard. Making the hard decisions often ensures success.
Great advice for those that can pull it off... Many we talk to don't have the option of a free place to live while having a home they own to be paid off by a renter.
@@TheresaEnglish if he gave advice on doing a TFSA investment then that could have been great advice too… part of life is figuring out what you want to spend your energy on and for some that will be a house investment and others will see more benefit from stocks and trading. Neither are wrong and both can be right for the right person.
How have you invested? Did you go the TFSA route?
Awesome video!!
Glad you enjoyed it and thank you for taking time to comment and watch!
Hey, good attempt at putting together the video and comparison numbers, there a few places you are off:
1. For the return on the investors down payment ROI we need to use compounding growth. So, $76,925 invested in the S&P 500 compounding at 10.22%/ year for 7 years = $152,016. This means an expected profit of $75,091 for the renter, not $40,954 as you stated.
2. Your maintenance costs estimate is too low. According to Scotia bank you need to use the “1% rule," which, unsurprisingly, says that homeowners should set aside 1% of your home's purchase price annually for home maintenance. *in this case you paid $500,000 for your home, you'd budget $5,000 per year for maintenance or $416 per month before inflation adjusting the figure.
3. For the home owner you state that the monthly growth rate on the house after 7 years will be $1,449,86 per month implying an annual inflation rate of just under 3.2% of the next 7 years - can you share with us the source of this estimate.
4. The difference between the rental costs and the ownership costs favors the renter before you adjust for inflation growth on the home value. you need to take the difference and add it to the S&P 500 investment monthly too. Therefore, 76,925 + $622 per month for 7 years at 10.22% interest per year = $227,225 ... renting is cheaper ...
Thanks for the comment...
1) This is the calculator used www.bankofcanada.ca/rates/related/investment-calculator/ it takes inflation into account and gives the future value of an investment.
2) Maintenance costs are subject to the property and quality that is purchased. $25,000+ over 7 years should be able to cover most issues that arise on a well-bought $500k home
3) As explained in the video, this is the average of the last 60 years of inflation
Nice breakdown
Thank you... and thanks for taking the time to comment and watch!
I personally think you did great job on explaining things but, regardless of that there are numbers of people who agree and disagree with all that you just said. And that's a human nature,some people calculate tight numbers some don't. Some people will buy house on tight budget but on top of that they go and lease 80 k pick up truck or SUV or big boat because how they gonna look next to nabour who has toys in front of his house. I still think buying is the way to go vs renting if you are in position to do so. Great analysis 👍
Thanks for the comment… nothing better then getting that lease to push you to your limits so qualifying for a home is hard to do. 🤦♂️
300+ on insurance? Wow i pay half of that
Make sure you keep that insurance then! :)
my two cents. The digital currency will change all of this. The great reset book pls review tge plans.
Please explain. How will digital currency change everything with buying or renting?
Can you make a video about buying a house under a corporation?
Thanks for taking time to comment. If you are looking to do this, as buying in a corporation is not easy now, it would be best to chat directly. Info@chamberlaingroup.ca
No corporation should buy family houses. This should be banned; houses are for families, not businesses, and business ownership would inflate the home market.
@@sovereignty14 rental for families is a huge market
@@ahnafahmad324 , …sure,… …so what about corporations owning family houses??
@@ahnafahmad324 , you cannot read/communicate very well.
Great video! You mentioned internet in there somewhere which you could leave out. For the renter...you may add 30.5% effective tax rate to the investment in stock market! All in all the number in buying should be even better than you suggested so this is a great video as it's a more concervative number. To proof buying is better than renting use actual historical data then this will make even more sense! Then theres also the power of refinancing...you could pull that $80 000 out in the future and your salary increase over 7 years will match the new repayment...you can even lock in lower after 5 years... doesnt matter how you crunch this buying always makes sense...well done on thia video!
Thanks for commenting and these are valid points for refinancing and more.
I know this is subjective but ain’t no way in hell would I move to those neighbourhoods! You need to take 2 vacation days, pack a lunch and bring your passport when you go that far to visit .😂😂😂
Thanks for the comment and watching. This wasn’t a video about these areas, it was more about buying vs renting. If you’re living in Airdrie, someone in Cranston may think the same thing for you 😂 😉
Do you really think the government can control inflation? Seriously? More money has been created in the past 4 years, then all money combined in the existence of the dollar. Government and it's agencies have never been bigger.
Inflation (real inflation that affects every day consumers) is going up and up. Let's be honest with ourselves.
Thanks for taking the time to comment... time will tell how this all plays out!
1:00 inflation... the net gross income required to pay for a $320'000.00 house is upwards of $11'000'000.00, thus all home owners are mentally insane.
15 year mortgage making $650'000/year... pays for a $320'000 house. there are more then +30'000 laws in the country, so if the costs don't line up its because they are braking civil structure laws.
@@ardennielsen3761 Not really sure what's happening here in your comments, but none the less, I appreciate you taking time to share.
My friend in Cranston made more money on his house than he has working in the last 5 years. With the hundreds of thousands he has made selling he paid no tax. Canada is funny. So much debt being created...for nothing.
Wow. He must have gotten a good price! Thanks for taking time to comment and watch