Monthly cost: $2,800

We will assume a yearly increase of 2.5% for the rental amount

Annual Costs:

Year 1: $2,800 * 12 = $33,600
Year 2: $2,800 * 1.025 * 12 = $34,440
Year 3: $2,800 * 1.025^2 * 12 = $35,301
Year 4: $2,800 * 1.025^3 * 12 = $36,183.53
Year 5: $2,800 * 1.025^4 * 12 = $37,088.11
Total rental payments over 5 years: $176,612.64

Utilities & Insurance

1. Heat, water & hydro monthly cost: $150
   
2. Tenant insurance monthly cost: $50
   
3. Total cost over 5 years: ($150 * 12 * 5) + ($50 * 12 * 5) = $12,000

Total cost of renting over 5 years: $188,612.64

Income from the basement to increase @2.5% annually. 5 Year average taken for calculation.

After owning this property for 5 years, you would have built up an equity of $458,282.77.

In order to compare the true cost of ownership of owning a home versus the cost of renting a home over the 5 year period, we can calculate the cost of selling the home.

After calculating the cost of selling this property after 5 years, it’s clear that after building equity during home ownership, not only does it pay for all your carrying costs, but you also make a profit!

1. Renting a home for 5 years would cost you: $188,612.64
   
2. Owning this home for 5 years would give you a profit (surplus) of : $22,589.32

Owning this home over a 5 year period would effectively profit you $376.49 /month surplus cash flow compared to the cost of renting at $3,144.00 /month out of pocket. Keep in mind that the longer you continue to live in your home, the more equity builds in subsequent years.

However, if you continue to live in the home for 10 years, the numbers change dramatically. Owning this type of home would give you equity of $956,797.03.

Renting a home for 10 years would cost you $400,433.63!
Owning and selling the same home after 10 years would give you a profit of $272,299.21! 

live in your home and continue to build real estate wealth! It’s important to know that there are numerous factors to take into consideration:

• Market conditions can change – interest rates can fluctuate and real estate prices can vary depending on the strength of the real estate market
• Over a longer period of time, mortgage payments will pay down the interest portion of the mortgage at a quicker rate
• There is a potential for tax benefits with home ownership
• Owning a property allows you to leverage equity to purchase another property or apply for a home equity line of credit
• Home ownership gives you control over home improvements and renovations
• Any profit/ capital gain from the sale proceeds of your principal home is totally tax free in Canada.

You can run these calculations for different properties in various cities and in different market conditions and get varying results. The key takeaway here is that there is no definitive answer to whether or not you should buy or rent, and that careful financial planning is important.

There are some other key important considerations to know:

1. There is the 40% rule which states that you should be able to afford your total housing costs as well as your debt payments (for example a car loan or your credit cards) with 40% of your gross income.
2. How long you plan to live in the property has significant effects on whether or not it’s better for you to buy or rent.
3. Do you like the freedom to move around or are you happy to find a more permanent place to call home?
4. The length and stability of your employment can drastically affect your ability to get a mortgage.
5. The quality of your credit score will be important whether you buy or rent. However, in a buying scenario your credit history will be assessed on predictable industry standards. That’s not the case when you’re renting where your credit history will be at the sole discretion of a landlord.
6. If you plan on becoming a real estate investor in the future and buying income-producing properties, owning your own property allows you to leverage the equity in your property to fund future purchases. When you’re renting, this is not an option for you. Don’t forget, primary residences in Canada are exempt from capital gains tax, which means when you sell your primary home, you enjoy all the profit tax-free.
7. Owning a property allows you to use your equity as collateral to apply for a home equity line of credit that will give you access to funds that you can use to renovate your property or invest in other places.
8. Renting means you’ll be spending a significant portion of your income towards housing that will likely not contribute to building and maintaining your credit score.

Whether you decide to rent or buy will not be an easy decision. However, in today’s economy it’s wise to carefully explore both options. We are currently in a high mortgage rate environment which means higher mortgage payments and this contributes to homeownership being less affordable. Current economic forecasts indicate that interest rates will start to decline later this year. 

This means that in the short term, it may be more affordable for you to rent if you are unable to purchase yet. Economic forecasts indicate that the housing market is set to rebound from current conditions. However, if you are interested in buying, now may be the best time to buy considering the ample supply of inventory of homes on the market. This means we have an opportunity to negotiate a much lower price for your purchase than in a balanced market.

In the long term, real estate ownership has proven to be one of the best pathways to financial wealth building for Canadians, and if you’d like to explore how to buy a property today and take advantage of the unique market conditions, give Team Paliwal a call for a free personal consultation.

You can make a big difference in the home buying and selling process before you start looking to move by choosing the right REALTOR. We want to ensure you understand the unique benefits of working with us:

• We ALWAYS have a detailed in-person or Video call meeting with every client because we know you have specific needs. We plan a personalized road map and process for your move.
• We aim to reply to every inquiry within 10-30 minutes because we know you want reliable communication with your agent.
• We work hard to stay ranked in the top 50 teams in Canada at REALTOR.CA and  RE/MAX  because we know you want experience and expertise.

How are we so sure we are the right fit for you?

RE/MAX Team Paliwal is a small team of highly accomplished real estate agents with more than 40+ years of combined experience in the Greater Golden Horseshoe Area. Our reputation for a thorough process attracts many first-time homebuyers, but we also work with all buyers and sellers aiming to upgrade their homes.

After hundreds of successful deals, we are fortunate to be one of the most trusted and highly reviewed real estate teams online. You can find all real testimonials and reviews of our team on RankMyAgent.com, a verified review platform by the Canadian Real Estate Association and realtor.ca.

Our team has ranked in the top 50 teams in Canada at RankMyAgent.com for the last 3 years, and our team leader Gyanesh Paliwal is the recipient of RE/MAX International’s Hall of Fame Award, Lifetime Achievement Award, and Titan Club Awards.