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Dear Renters: Home Ownership Costs Plenty

Home ownership costs plentyMany people assume renters are only renting until they can save up enough money to buy a house.

Isn’t that the ultimate plan: to save up, put a down payment on a house, buy and eventually own the home over the next 10, 15 or 20-plus years?

It doesn’t have to be. Home ownership is not everyone’s dream. Far from it…

It’s not always the best financial decision either. Like any investment you should do the math.

You also need to consider if putting all your money into one asset (your home) is really a smart thing to do. Finally, you need to assess your lifestyle. Putting all these factors together, renting isn’t throwing money away. Renting might be the best thing for you or your family.

Let’s break it down using my lessons learned.

We Started Out Renting

Many years ago before my wife and I moved into our condo together, before we got married, we rented separate places. I never considered renting throwing my money away at the time because paying rent did one thing very well – it put a roof over my head. I was trading money for something I needed - shelter.

How much you pay in rent will depend heavily on where you want to live. Real estate pundits don’t chant location, location, location for no reason. My rent was modest in the city before the recent real estate boom in Ottawa. Renting in the city was also a lifestyle choice. Amenities were a short walk away. Renting offered freedom many years ago – freedom from any major house maintenance or repairs - more on that shortly.

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What We Learned From Buying A Condo

In 2005, my girlfriend (now wife) and I bought and moved into a condo together. I recall the price tag was around $240,000 in downtown Ottawa for our two-bedroom, two-bathroom unit with about 1000 sq. ft. It was a nice place in an older building. Based on today’s downtown Ottawa condo prices that seems rather cheap...but times change.

Related: Is The Home Buyer’s Plan Worth It?

Our condo mortgage costs were modest and the lifestyle was simple – not much to maintain – but let’s not forget the common elements.

Soon after we moved in, the elevators needed to be repaired, the pool and hot tub needed to be fixed, and a couple of years later the condo board decided the building’s foyer and common rooms needed upgrades. In addition to servicing our long-term mortgage debt, we had condo fees to pay for these common element changes AND property taxes to cover.

Beyond our mortgage payments at the time, condo fees ran us close to $500 a month and property taxes cost us another $300 per month. Although the condo lifestyle was good and we enjoyed our amenities we couldn’t justify the rising condo-ownership costs. After renting the unit for a few years – we eventually sold it.

Our lessons learned:

  • Renting in the city of Ottawa many years ago would have been far cheaper than our short-term condo ownership experiment.
  • If you decide to buy a condo, now or in your future, make sure you understand and forecast the costs of ownership beyond your mortgage. Those costs can easily amount to hundreds of extra dollars per month.
  • If you decide to buy, try to stay put for at least 10 years. This time period should help you live through any real estate cycles and ensure your home appreciates in value.

Now We’re In A House - A Big Decision

My wife and I have lived in our current home for six years now. We enjoy the space (1,800 sq. ft. bungalow) on a small lot of land just outside the city.

dearrentershomeownershipcostsplentybody1.jpgWe decided to buy this home and get a mortgage a few short years ago. Looking back we borrowed what seemed like a ridiculous amount money to buy this place – over $300,000.

Thankfully, due to some hard work, our mortgage is now almost half that amount. However I cringe when I think about the interest costs we’ve paid over those six years. Even at today’s low borrowing costs – it’s still a ton of money.

Related: How To Save Money On Your Mortgage

True, we don’t have monthly condo fees here, but the equivalent amount we used to pay for our city condo has gone into maintaining or improving this home year after year.

We also have more land here and we’re not living in a box in the sky – but we’re also further from the city. We drive more. We have a bit more time on the road for our weekly commute to work. We spend more on gas.

Our tradeoff is we have general serenity and little environmental noise here. We have walking paths and trails in our community – along with an active community presence.

While the mortgage beast is slowly being slain every couple of weeks, pushing our net worth higher, I’m not convinced our house is skyrocketing in value. Yes, home values depending on your market have appreciated in recent years (I’m looking at you Toronto and Vancouver). The same cannot be said for us.

Related: How To Hire A Real Estate Agent That Really Cares

Yes, our house value has appreciated in six years, but not by leaps and bounds. We don’t think buying this home was a bad investment. Thankfully it’s not our only investment. We believe our home is just one part of our portfolio so we invest outside this home prudently.

Our reflections this far:

  • Buying this home was both a financial and lifestyle decision – there are tradeoffs we continue to accept with home ownership.
  • Home values are not guaranteed to rise in all areas. Like the stock market in the short-term house prices can be fickle and uncertain.
  • Home ownership has costs – maintenance and upgrades are required to maintain a home’s value. Your budget needs to continually account for those.
  • Regardless if you rent or buy, consider what you have left to invest for your future self. Renting may provide you with more cash flow for retirement savings.
  • Retirement savings, outside the home you own, are important for diversification.

Our Future In Home Ownership

How long will we live here?

Hard to say ... but we’re committed to another 4-5 years for sure when keeping in mind our lessons learned above.

If you decide that you want to own a home, I say do the math and strongly consider your lifestyle. The former has financial answers for you and the latter will likely have an emotional attachment.

The smart shopper will consider both the numbers and their lifestyle because home ownership costs plenty. That is why renting is never throwing money away.

Mark Seed is one of Canada’s leading personal finance and investing bloggers. With his wife, he is working his way towards a 7-figure retirement portfolio for an early retirement in addition to slaying the mortgage dragon. You can follow my friend Mark and his financial journey on My Own Advisor.

Disclosure: Some links in this article may be affiliate links. We're letting you know because it's the right thing to do. Here’s a more detailed disclosure on how HTS makes money.


Tom's picture

Completely agree with your write-up.

December 06, 2016 @ 10:10 am
Rick's picture

My decision to purchase a house, I bought in January 2016, in Victoria was because it was too expensive to purchase in the Vancouver area where I grew up. I am now 62 and I believe that the main motivation to purchase was after hearing stories of people in their 70s and older in the Vancouver area who are renters not being able to either afford the rents or are not able to find a place to live after being given an eviction notice. I didn't want that to happen to me. I was able to put down nearly 50% for the down payment and I have renters who are paying my mortgage.

December 06, 2016 @ 11:34 am
My Own Advisor's picture

Home ownership absolutely has benefits, including when to stay or leave on your own terms. As you get older, I can appreciate the stability ownership can provide. Thanks for reading Rick.


December 06, 2016 @ 8:20 pm
William Nichols
William Nichols's picture

My wife and I bought our house in 73 because we were both country people and wanted some land . I have not regretted it because of quality of life for kids when growing up . The house has probably increased in value of $320,000 above purchase price or more. People say great but people forget that I have paid 75 -85,000 in taxes, did about 55-60,000 in major renovations or more., replaced the roofing twice for at least 22,000. Needed plumbers and electricians a good many times for maintenance which cost easily $6,000 over 40 years. Plus as a home owner you tend to take care of lawns, snow removal, replace a window here and there, repair chimneys, driveways, paint your home, change locks, taps, etc which easily adds 5-7000 . We also spend much more on energy costs than in an apartment , easily $70,000 extra over the years. Plus we probably paid interest on the mortgage amounting to 40,000.(maybe more)
All of a sudden the increase in value of 320,000 or more must be decreased by these expenses so take away about $280,000 and now we have maybe $40,000 but wait we have not adjusted for inflation.
Sure you may have a greater increase in value than 320, 0000 especially in Vancover or Toronto but take away your much higher down payment(remember it is a cost especially when you add the lost income from it), much higher interest total, much higher taxes, much higher taxes, much higher cost of renovators, and in many cases much higher commute costs ---as well as where would you go after you sell to reap the rewards and at what cost.

December 06, 2016 @ 12:53 pm
Rad's picture

WOW!!! Thank you for being so honest and forthcoming. My wife and I have recently become parents of twins...we are older parents. We live in Toronto in a 2 bedroom rental because we cannot afford to buy a home. Not sure if its worth pursuing the dream of home ownership after all.

December 06, 2016 @ 2:28 pm
My Own Advisor's picture

Happy to do so Rad, I hope this provided some considerations for you to make an informed decision. Thanks for reading.

December 06, 2016 @ 8:38 pm
My Own Advisor's picture

Exactly why I wrote this post William...

We've replaced the roof since we moved in, and updated our bathroom - both cost tens of thousands of dollars.

Like you, we also pay maintenance costs to take care of our lawns (I do it) and for snow removal (others help me), etc.

"All of a sudden the increase in value of 320,000 or more must be decreased by these expenses so take away about $280,000 and now we have maybe $40,000 but wait we have not adjusted for inflation."

People really need to think through home ownership carefully and you have certainly done the math while you are there. Kudos.


December 06, 2016 @ 8:26 pm
fbgcai's picture

One can also look at the ongoing costs as providing that thing you mentioned early in your story - providing shelter. Also if you rented for 40+ years - say 480 months @ $1000/month, hmmm that looks like $480,000 to me - btw I'm guessing the $1000/month is VERY low never having looked at rents.
My take on owning a home is it is MY place to live - the investment aspect is tertiary - if it gains great, if it doesn't also great - I lived in it.

December 14, 2016 @ 6:06 pm
Charlene's picture

What is the best investment strategy? Owning a house, or stocks? What gives the best return on your money?
If you buy stocks, they could go up, or get wiped out, but at least you can't lose your house and you have to live somewhere.
Yes, it's a lot of work for upkeep and to maintain and buying a new house has no guarantees either. Anything can go wrong.
If you are lucky enough to buy during a recession, then it can only go up in value.
(I did this, bought the house outright after many years of saving up, no mortgage, and close by where I work).
A lot of money goes for expenses, but it also costs money in expenses to live in a condo too.
In the end, you get all your equity out of a house, you don't get anything back if you rent.

Home ownership gives you more privacy, no fighting with a landlord to fix things, unexpected rent increases, noisy people next door and smells from cooking wafting in the hallways. I would also be worried about fire, some people are careless.

Maybe it is based on lifestyle? Own a house if you can maintain it and do all the yard work. Own a condo when you can't .

December 06, 2016 @ 2:05 pm
My Own Advisor's picture

Good questions and comments Charlene but renting is more than math, it can be a lifestyle choice free from most DIY work.

Home ownership has challenges because you can't pick your neighbours - there are no guarantees they are good ones!

In the end like most things in life there are pros and cons to everything; at least if you have this open discussion with yourself (buy vs. rent) you're going into things eyes wide open vs. blindly following advice or suggestions.


December 06, 2016 @ 8:34 pm
Shiraz's picture

After getting outpaced into multiple bids for townhouses (townhouse is half size of house but with strata) in Lower mainland (Vancouver), we finally ended up with a Condo recently. I had been renting for past 10 years during which I experienced job losses, financial crunch. We still feel bit deprived as we now target to get a bigger place in few years with the expectations that market will be flat or increasing at slower pace and our mortgage doesn't go under water.
One thing I always noted in experiencing these economic real estate cycles is that population is a great influence. As population keeps on increasing, the demand for limited resource like land will keep on increasing and that hurts people who want to genuinely buy instead of investing in real estate. The government has to wake up and start creating more towns or suburbs instead of making concentrated vertical constructions.

December 06, 2016 @ 9:46 pm
My Own Advisor's picture

Urban sprawl is an issue as well though Shiraz - more 'burbs, more infrastructure, more cars on the road, more costs - environmental and financial for cities. There is no easy solution but I get your point about just massive huge buildings in the downtown cores of major cities.

Thanks for reading.

December 08, 2016 @ 7:44 pm
Susan's picture

I love the article!......and William explained it exactly as I try to tell others but they think I am nuts.

A note to Charlene, from my experience, a homeowner has less rights when it comes to bad neighbours then someone renting. If your neighbour next door at your house is having endless parties all the time, with the overflow on your driveway, what are you going to do about it? At least in the apartment building a complaint is put into the rental office and the offending tenants are warned. If they want to keep it up, they eventually are booted out. I am using a party as an example but insert many issues into the example.

December 07, 2016 @ 10:55 pm
My Own Advisor's picture

Absolutely correct Susan. Bad neighbours (with homeownership) can be an absolute nightmare. You have issues when living there and you might have issues selling your place as well.

December 08, 2016 @ 7:45 pm
Ken's picture

Another interesting consideration for renting vs. home purchase.

My wife and I currently own our home in Calgary. We've owned the house now for 16 years. It's paid off. There is no mortgage on it.

We do not have children. We have talked about retiring and leaving Calgary for a better climate in about 10 years. (We are 50 right now and have already reached financial independence. I only work now because I enjoy what I do.) At that time, there is consideration for purchasing a condo (we travel a lot and like the lock up and go lifestyle). But we are increasingly leaning towards renting when we sell our current home, provided there are good "permanent" options for renting.

Why tie up $500K by purchasing a condo? If we were to purchase and live in the condo til we are 85, we then sell it and get our capital back. But at that age, that return on investment might not be all that useful to us. If we sell our home when we retire and rent, we now have $500K that we can invest and also spend over our remaining years. We are not leaving any money for anyone when we die. So why tie up money in a house or condo? Going into a rental property in our retirement years makes a lot of sense to me. Is there anything else we should think about?

December 08, 2016 @ 2:20 pm
My Own Advisor's picture

Interesting to hear Ken.

We're on a similar path, just a few years behind you maybe....we hope to be age 50 and then work on our own terms - that's about 6-7 years away for us.

Not that we don't want to work - rather - wouldn't it be nice to have the freedom not to?

My wife talks (often) about renting while we travel more. We plan to do more travel in 2017, and more in 2018.

If there are good permanent options to rent in Ottawa - we might just do that - like you putting our capital to work and letting the capital pay for our travel expenses. Our investment income will cover all rent.

We figure we need $30,000 per year from our investments to call it quits. We're getting there.

Good luck with your decision, sounds like an exciting one!


December 08, 2016 @ 7:51 pm
Al's picture

Exactly Ken,
I just turned 70 and like the rest of us have some health issues making tending to a home more difficult/ costly using contractors/ frustrating.
We took our $ 400,000 proceeds from our 2400 sw. Ft home, of which we used less than 1200 sq.ft., invested it safely / wisely and now rent a 1500 sq ft. apartment , fully loaded incl. heated underground parking, exercise rooms, walking/ running track, pool, hot tub, sauna, river view, etc, etc.
The rent - is 70% paid for via the annual return from our investment of $400,000 leaving our pension / saving open for travel, etc. and NO stupid condo fees, changing rules, etc. Great landlord , basic rules, 24 hour security, etc.
Living in bliss.

December 18, 2016 @ 7:46 am
Jan's picture

Personally I think house ownership is by far the best choice. If you do the math over a whole lifetime, owning a house comes out ahead by a lot, plus you have the intangibles of being free from rent increases, evictions etc.

After 20-25 years when your mortgage is paid off, your living costs drop dramatically and they stay down for the rest of your life. People compare renting vs owning for 10 or 20 years and renting may come out ahead, but when you compare over 40 or 50 years owning always wins. It must be horrible trying to come up with the rent while living on CPP and OAS at 90 years old.

If you are in a house you have control of maintenance costs but condo owners can be hit with huge bills for big jobs. I put on a new roof for $11,000 while a friend living in a condo was billed $70,000 to replace a roof and waterproof all the decks.

As an owner, you will never have to cope with rent increases on a retirement income, and you never have to worry about someone selling the house out from under you.

In my circle, most people own their homes with their mortgages paid off, but some families never made that step and now when we are all approaching our 70's, the owners have much better financial options.

December 14, 2016 @ 6:14 pm
Stephen's picture

Agreed, home ownership isn't for everyone. I like not having lawns to look after and driveways to shovel. I'm currently in a high rise apartment with a great view that would never exist in a house and my vehicle is stored underground and always warm in cold Canadian winters.

January 07, 2017 @ 10:53 pm
Stephen Weyman
Stephen Weyman's picture

I didn't know there were any Cape Breton PF bloggers around - thanks for stopping by Stephen. We have the same name too :) I'm in New Brunswick.

January 17, 2017 @ 10:17 pm
Mike's picture

I rent my place in the lower mainland for less than three days take home pay,I get free cable,laundry,wifi,utilities included and the backyard to myself.My landlord subsidies my lifestyle immensely so much so that I am able to save 60% of my net take home pay and still take incredible vacations every year,weekend getaways every month.
I couldn't see myself having a $500,000-$900,000 millstone around my neck,I sleep well at night(having been able to save up 23 years living expenses while being a renter) all on a blue collar tradesman rate.
Renting Rocks!

January 12, 2017 @ 9:54 pm

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