Renting vs Buying a Condo

Buying a condo is usually seen as the first and most cost effective step to home ownership in a big city. But is it? Similar to my dry-heaving on the value of paying a maintenance fee, I've been ruminating on the numbers when it come to owning vs renting a condo.

See, before our family bought our current home, we were renting a similar home in the same condominium complex. We love our rental property so much that we snapped up the townhouse when it came up for sale. HOWEVER, the truth is that on paper, it's costing us more out of pocket to own this home than it cost us to rent. Like $400 more. (We do have an additional bedroom so size-wise it's a one bedroom plus 400 sq.ft upgrade on our rental)

Let's get to the numbers. How do you truly evaluate the cost of owning a condominium vs renting a space in one. Here's my little cheat sheet:

Cost of renting = monthly rent

Cost of owning = monthly interest payment portion of mortgage + monthly property tax + monthly maintenance fee

By this calculation, we actually saved $200 by owning instead of renting plus got some more space to boot

Assumptions

  1. A portion of the mortgage payment goes to pay down the principal which becomes equity back in your pocket whenever you sell
  2. Assume the landlord will pay the maintenance fee and it forms part of the rent
  3. Only factor in utilities that are covered by the maintenance fee 
  4. One cost that can't be captured is the cost of major internal repairs that are not structural (The condo board takes care of structural repairs). Actual costs will depend on the nature of the damage and tenancy agreement. I've been in a rental where the air conditioning stopped working and the landlord didn't fix it for 4 months until we moved out. In another rental, the washing machine stopped working and the property management company informed us that they would no longer be supplying that appliance and took $10 monthly off our rent. Our cost? Buying brand new washer-dryer which we still have but still that was an unexpected $1600 out of pocket
Lesson Learnt

There are a lot of articles on the internet on the rent vs buy debate and both sides are pretty passionate. The best thing to do is to make an informed decision by running numbers that apply to your specific situation - city, neighbourhood, credit rating, mortgage downpayment and family needs must come into play.

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