Rent vs Buy. Pros? Cons?

Okay, okay… we’re real estate brokers and some may argue that there’s a conflict of interest here… Let’s get that on the table right now. At the end of the day though, we have a pool of clients who want to rent – and we respect that. This article is for them and anyone who may be on the fence between renting and buying.

We’ve done our best to illustrate the facts in as simple a manner as possible – without any hype or bias…. There are certainly benefits to either choice and we’ve laid them all out here.

Also, while lofts are fantastic and interesting and condos are, well, not fantastic and interesting – it should be noted that a loft “does” adhere to the condominium bylaws. Yes, that means that technically, a loft is a condominium.

Renting:

Well, you certainly have a lot less responsibility as a renter. If you want to move, you don’t need to worry about selling your loft or finding a tenant to rent it out to. As well, if something breaks down within your suite, you simply give your landlord a call and it’s their job to address it.

It should be noted that in a loft/condo, you aren’t likely to have many problems within your suite. The reason is because your landlord is paying maintenance fees that go towards the overall structure and amenities in the building. If there were a flood or plumbing issue, management would address it right away.

Another benefit to renting is that there are NO closing costs! Closing costs for a purchase range from between .5% and 2.5% of the purchase price. For First Time Buyers, the closing costs are very minimal (about 1%).

Despite these benefits, renters typically opt to buy at some point. The following are the top reasons why:

1: No one likes to be at the mercy of anyone, particularly a landlord. After the standard 1 year lease is up, a landlord can terminate the lease if he/she wants to sell the property or make it available for a family member. For anyone who really wants to settle into their home, renting is never an ideal option.

2: According to the Residential Tenancies Act, a landlord has the right to increase the rent after the lease period, at any rate they want, if the condo was built “after” 1991. If the condo was built before 1991, landlords can only increase the rent by the government approved amount (rate of inflation – usually 1% – 2%).

3: Most loft/condo rentals are owned by investors (who usually own up to a dozen suites). The investors goal is simple: Make sure the rent amount covers the property taxes, maintenance fees and the mortgage – at the very minimum. Hold onto the property while the tenant pays down the mortgage and builds equity into the property. Alternatively, if the market shifts to a strong Sellers Market, the landlord/investor will likely opt to sell the property as soon as possible. The built up equity would be a bonus.

So, if renters are building equity for the landlord “and” paying for the additional expenses, why don’t they buy and build equity into their “own” properties?

The reason is because not everyone is qualified to buy a property. You need the following in order to do so:

- 5% downpayment – For example, a $300,000 property would require a minimum of $15,000 as a downpayment (this isn’t a bad thing by the way – the higher the downpayment, the less interest you pay on your mortgage).

- Good credit – usually a minimum credit score of about 650, depending on the lender.

- Stable income

Most people that rent from condos earn enough to afford themselves the lifestyle that a condo offers (as opposed to an apartment). However, they likely don’t meet all the criteria above.

If you are weighing the options yourself and meet the criteria, there are 3 simple steps to take:

1: Determine what type of condo you want, in which location, and then an approximate budget you’ll need. We would be happy to help you get started!

2: Talk to a mortgage broker or someone at your bank. Find out what mortgage amount, or budget, you qualify for. We recommend using a mortgage broker because they look at “all” the lending rates and pick the best one for you.

3: Start your search!

We hope this article has been informative. If you’d like to get into a loft or a unique urban living space in Toronto, contact us. We would be happy to assist you!

Robert Van Rhijn

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Welcome to Truelofts.ca

Spacious living and abundant light in a condo? Lofts offer all of this and much more. They are rare, historical and quickly becoming one of the most sought-after property types in Toronto. Because of their lower supply, they are better at retaining their value than traditional condos. If you want to call a loft your home, start here!
For more information, contact:
Robert Van Rhijn
cell: 416.912.6445
robert@slaterealestate.ca

Nathaniel Hartree-Hallifax
cell: 416.317.5141
nathaniel@slaterealestate.ca

Lorena Beccari
cell: 416.399.2848
lorena@slaterealestate.ca

Slate Realty Inc., Brokerage
51 Wolseley Street (Queen & Bathurst)
office: 416.720.8080, fax: 416.981.7608

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