Rent vs Buy. Pros? Cons?

Okay, okay…we’re real estate brokers and some may argue that we’ve got a bit of a bias… Let’s get that out of the way 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 (with some exceptions of course) – it should be noted that a loft “does” adhere to the condo bylaws. Yes, lofts are condos too (at least in their legal/ownership structure).

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. They may not address it expediently, but it’s their responsibility (provided the deficiency wasn’t a result of your negligence).

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 minimal (about 1%).

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

– 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 an immediate family member. For anyone who really wants to settle into their home, renting is never an ideal option.

– 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 $400,000 property would require a minimum of $20,000 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 who 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 above criteria, there are 3 simple steps to take:

1: Determine what type of condo or loft 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 that you can trust. 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: Review the best available options within your price point. Contact us and we’d be happy to make some recommendations.

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!

TrueLofts.ca Team

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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!

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