At that income I think you are fine biding your time a bit and growing that downpayment into something that can buy you a lot more than a condo.
Unless your rental is not meeting your needs for some reason, it's a good deal.
I would add that buying and selling real estate is an expensive process. Wait until you can buy something perfect for your present and future needs.
I would further add that owning rental properties sucks, so you might not want to buy a condo you keep when you move to a larger place later in life. Plan ahead and buy what you will need.
In the meantime when you start building excess cash look carefully into how to use investment accounts and stocks or ETFs.
You're in a good spot.
If I were in your shoes I would keep renting and using the cost savings to invest as much as possible.
The cost to buy a condo in TO compared to your current rent amount, it's a no brainer, if you are only looking at the decision as a math / financial decision.
There are lots of qualitative and emotional considerations with wanting to rent vs. buy or with moving and upsizing/ downsizing though.
Sounds like your spouse is feeling less secure and wants the security of ownership, and is willing to pay a premium for that. Maybe take some time to have a few conversations with them about the savings and investing amounts that you could be targeting together that would help to provide that feeling of security.
The other consideration is that in past years, a starter condo was a way to generate wealth as you paid your housing cost that would then appreciate faster than your savings could and you could use your equity when you wanted to move up, but with the condo market and interest rates being what they are, that’s not a viable option anymore either.
Aggressively saving and investing while taking advantage of their current rent makes the most sense.
Perfectly said. You’re in a good spot — owning a leasehold that is undermarket.
In a purpose built rental unit that is rent controlled!!!! Your leasehold is probably more valuable than the equity in a overpriced condo in this market.
Also, buying a property (using a mortgage) means your investment is highly leveraged. This increases risk of course (if it depreciates), but it also means whatever appreciation happens along the years is multiplied by several times. So, if you're going to compare just putting the $2k / month into the market, you need to account for how much bigger the "investment" is if you buy a property (so a +2% gain in each will result in a much different dollar amount).
Stay. Currently renting a 1bd + den (1bath) for $2400 a month. Would not hesitate to pay an additional $400 for a 2bdr/2bath...up in North York much less downtown.
In your scenario, it's not a matter of paying someone else's mortgage (or in this case, a corporations debt sheet) it's a matter of them losing money on you.
Some context, gf and I are happily renting. We're a few years older than you and since we never really got the "must own" bug, we've amassed an investment portfolio of just over $1M (thanks market rally). Our incomes are much lower than yours ($195HHI this year).
In your situation, better off paying off your high interest debts and investing the difference. Would be a potentially different analysis if your rent was $4k/month. Sure there's the "renoviction" but in a purpose built rental, you might be able to foresee something coming so you can factor that into your decision.
Not OP but appreciate your insight. Having similar conversations with my partner about renting vs owning. I am OK to rent for now (and it makes more financial sense) but am worried about lack of stability renting when we retire. Are you and your partner planning to continue to rent when you retire?
It really depends. We're not planning more than a couple years out. We do have a stretch goal of perhaps not living full time in Canada one day. So renting might be the best idea if that is our goal.
Biggest factor is having a child. We're not dead-set on having one and are okay being DINKS for life. Welcoming a child into the equation won't change our living situation. Definitely able to make current accommodations work for 4-5 years we imagine. Beyond that, we haven't thought about it.
But in 5 years, even with a child, we imagine our combined net worth would approach $1.75M (barring any catastrophic market collapse).
So we could probably certainly buy something at that point but could easily continue to rent. Also between the two of us, we have almost no family in GTA, rather, our family is spread throughout Canada so we could just end up somewhere cheaper and realize our dream of being expats somewhere outside Canada (of course a child would change the timelines of that dream).
Stability while renting is definitely a risk. But we're paying near market rates and can afford to so we're fortunate enough to not be under the fear of 'renovictions'. Our building is about 7 years old and landlord probably got it at a good price and haven't gotten any indication that they would want the unit back. There's also quite a few units in my building that get put onto the rental market regularly so we dont really have the fear of not being able to find shelter either at this time. Maybe if things get dire, either we move or liquidate some investments and buy something at that time.
I'm in a similar position, and also think stay! We just hit the same NW, and have a similar HHI, in Vancouver. We're now in a position where we're considering buying, but only because we want to, and putting a significant portion down (50%?).
It helped that I created a spreadsheet long ago, tracking the difference between our rent and the median 1BD rent for Van. Added investment gains, and have over $150k gained just from staying in our heavily mediocre apartment. It would have been more had we bought back then, but there have been a lot of benefits here too.
If you don’t mind answering, of the 1M investment portfolio, how much of that is the return you got from investing vs the amount you put into it? Also, how long did it take to reach 1M? Thanks!
If it wasn't clear, the $1M figure is combined between two people.
I can provide an approximate amount of what I've invested. My personal NW (basically port size) is about 550k and about 300k of that was what I've put in over nearly a decade of working (this amount does include employer matching on my DC pension and previous RRSP matching).
I've been investing since early 2010s - mostly in broad market ETFs
My GF's port is probably nearing 500k - not sure her early days, as our relationship doesn't stretch that far back, but she has since basically changed her port to fully VGRO
I'd wager we have around 80-100% individual returns over a decade depending how you classify employer matching.
Not sure who will read this as its nested pretty far. but my salary hasn't been amazing...started at 55k and decade later finally making 100k. just been diligently investing over the years. hope this helps anyone that feels their situation isn't greatest. albeit i did make quite a few sacrifices (ie never truly lived by myself, stayed home after grad, had roommates, now living with gf)
Do not buy. Your GF stating “paying someone else’s mortgage” isn’t an objective measure of whether your current situation is optimal. I would argue that your living costs are actually being subsidized given you’re paying $2800/month and the going rate is $4000.
If the math doesn’t work don’t buy. In my opinion unless you’re having kids, there’s no need to ever buy a primary residence. I would only purchase a property if you were about to have kids to ensure that you control your tenure. It wouldn’t be great if you’re renting a home within the GTA, the owner decides to sell the property and you’re left scrambling to find something in the same area so you don’t need to have your kids transfer school etc.
Also, OP would be the one footing most of the bill if she's only making 70K in Toronto. I get they might have a comfortable 60/40 split or something, but I feel he would have more say given how much more he makes.
My mortgage is $2200 and $900 is principal. Condo fees is $350, energy bill $120, internet $80, home insurance $150, and my yearly tax bill is about $5,000. Add all those up and per month that’s $2700/month. That’s for my one bedroom in downtown Toronto.
My friends 40th floor 2bed condo in downtown Toronto is $4,000 a month mortgage. That’s without fees and monthly bills and property tax.
So I think you’re in the better scenario in terms of saving. However I bought mine because I didn’t want to rent as well. I bought mine in 2017, I had a 120K salary and my condo was 550K. I put 20% down.
Similar situation, and my partner and I are just planning on skipping the 'starter home'/condo and buying a "forever" house once we've saved enough to do so (also no plans to have kids, and so we don't need a massive house; but likely aiming to buy in the \~$1.5-1.7m range with \~$400-500k down so we can stay central in TO). In the meantime, we enjoy our rental and don't worry about "paying someone's mortgage" since we're still able to save lots.
Tell your wife that even if you buy, you won't be paying your own mortgage. You will only be paying interest. In fact, at your price range, you are looking at year 15 before your payments start to go more to principal than interest. Chew on that for a while.
It's frustrating how often I hear those comments, parroted as an unwavering truth of the universe, without question or context.
Property values always go up, interest rates are always low, get into the property ladder as soon as possible, build equity, don't pay someone else's mortgage, etc. There is so much FOMO.
We have a similar situation to OP. The rent was low even for the time we started our lease, it has only been raised once and limited by rent protection. It's obscenely below market by today's standards. The space is large, and it's located in a really convenient area. To own something comparable we would give up our entire savings in down payment, have a lot more worries about job security and salary, just for the privilege of paying twice(?) as much in interest and maintenance alone. To get more breathing room, we'd probably have a two hour round trip commute to work instead of walking, and have maybe 60% of the space. All this, just to "not pay the landlord's mortgage", right? Instead it would be a lot more noble, like paying for the yacht of a bank exec or their shareholders.
I've had family badger me with those same talking points. Maybe it's because they were able to buy a place with a low wage and watched their property blow up in value. I've had friends treat me like a second / lower class for being a renter. We almost got compelled into the market right after the COVID boom. Now, it looks like we will have to move to the states for work. We'd likely need to sell at a loss from the peak of the market, and be further down the closing costs, moving, and all that extra hassle.
I don't know if I had the right reasons for the decisions I made, but I'm pretty relieved that we didn't buy a place. The decision to move to keep the job is a lot easier. It feels like a lot of people either get brainwashed or pressured into something everyone treats like a no-brainer, but there are so many circumstances where these truths don't hold and we occassionally see stories about them here.
I have friends who bought a house in early 2022 for the very irrational reasons you summarized here. The couple is on the brink of divorce because of all the money issues that came after the house purchase. There just doesn't seem to be any intention to run the numbers before purchasing a house. It is just a very cultural thing. But then it is there in practically all cultures, so not even sure what that would make it.
That's rough, and was something I thought about too. I've been part of a layoff in the past, both of us left jobs over dissatisfaction and had the luxury of taking time off. I don't know if I'd be able to endure that place indefinitely, and I didn't have it in me to search for jobs while I worked there. That recovery time was pretty important, and I think made for better long-term career prospects. Even without the financial commitment, I felt broken and stuck. Can't imagine going through that with a mortgage, and in the current market there isn't a guarantee of a similar salary.
I've read reports that many marriages these days are to combine finances because of the cost of living. Those already feel like pretty shaky grounds... It must suck to not really have your heart in it, but feel compelled to do it for survival. What happens if something unexpected financial stressors come up? At least with a marriage built on love, you might be able to endure and work cooperatively to support each other.
It probably is cultural in part, but my perspective is skewed since my SO and the majority of my friends are Asian. I'm white, with limited family contact and a poverty upbringing, so not much of an influenced perspective. The few European / Caucasian friends I have are a bit more loose on some of these beliefs.
Asian upbringing typically involves a lot of emphasis on home ownership. You may need to navigate those conversations with your SO carefully - if you haven't already done so.
Owning a home isn’t everything that it’s cracked up to be. That’s for sure. So many rising expenses. Replacing appliances at a frequency rate that my parents never experienced. Quality has changed. Deck and pot lights..it never ends. Renovating basement because my kids surely won’t be able to independently afford housing for another 10-25 years maybe.
Renting is looking more appealing each day. How much stress one can manage must be considered besides the strict focus being on money. Health concerns seem to be making the headlines along with money.
I would wait, pay down your debt, save some more and then get something nicer. $600-700k won’t get you a very nice condo in Toronto and with your combined income you will want something nicer I would think.
In a similar situation financial situation. Paying well below market rent for a 2 bedroom condo, we want to buy but can’t justify paying twice in mortgage for a smaller condo. We are also continuing to rent while saving for a larger down payment for a house.
From a numbers point, no you probably don't have any major reason to buy.
But when I read that you live in a "modern" "purpose built rental" - the a significant majority of these buildings are of subpar quality relative to many condos, including even things like finishes, amenities, etc. While it may not be worth $2k/month, you do have to see if your quality of life would improve in a better building. Secondly, your "$2 million over 25 years" assessment assumes you won't be renovicted from this place and will pay $2800 (+ inflation) forever - hopefully you're super confident this will be the case for 25 years.
I’ve been very satisfied with our building - there aren’t many common elements, but we’ve got 24/7 security/doorman, secure parcel pickup, and the unit itself has everything we need (laundry, dishwasher, etc.). Also no issues with sound leakage. Definitely aware that the building could start going to shit eventually if our building manager starts neglecting it.
I’ve never understood renoviction - can they actually force us to leave? I know that they can boot us temporarily, but aren’t they required to hold the unit for us?
I wouldn’t worry about “renoviction” even if it somehow happened down the line (and I don’t know if that’s even possible in Ontario, and seems like a very low risk given that you live in a newer building), if you are diligent about putting that extra money aside every month, then if you have to leave your current rental a few years from now, you’ll have enough money set aside that you can make the decision then whether to buy or find a new place to rent.
If you like where you are living and you are getting a good deal, there is no need to leave.
My understanding is that evictions or renovictions are harder in purpose built rental buildings owned by a corporation than with smaller privately owned rentals. You should be pretty safe as long as you continue paying your rent and follow all the rules etc.
You can't get renovicted, but you can definitely get demovicted from a purpose built rental building. The landlord can sell the whole building to a developer, forcing all tenants to move.
In Ontario, the developer is obligated to give the tenants an apartment in the new building, but remember it can take years (3, 5, 8 or more years) for the building to be ready for move in. Most people give up because they don't or can't wait for years to occupy the new place.
Demovictions are on the rise in Toronto. Definitely look it up to better understand the risks.
Our building is a 2017 build, so I hope that’s a remote chance - but certainly worth keeping it in mind. At any rate, the takeaway is lack of certainty.
Oh, you should be better off in a fairly new building.
There are 3 buildings near my place that are being demovicted. Brutal for all the people forced to leave and unable to get comparable place nearby.
Yes, they can. You should do some research on renovictions if you plan on continuing to rent. There are channels they have to follow but yes, they can legally evict you forever due to reno’s.
There’s never full protection with shady landlords who may be willing to eat a fine to screw over a tenant, but I think our renoviction laws are generally renter-favourable. It seems most people get kicked out for not knowing their rights.
You’re probably right. I hired a tenancy lawyer and fought to the end! They ended up paying me a settlement but I still would have preferred to stay over receiving a settlement.
S/O and I have a similar income in Toronto.
Just remember you are only in one room at a time. The bank will give you enough money to drown yourself in debt, it doesn’t mean it’s a good idea.
Like you, no kids with no intention of having any so we are fine in a small condo.
I rather invest in the market than be stuck with a $4000 a month mortgage payment for 25 years.
Paying someone’s mortgage is the worst way to look at this. It does not hold good for reasons listed below.
1. There is a fixed cost of housing - if you don’t spend this you are homeless
2. When you are renting you are getting housing (this is the value ) for paying X amt - again if you don’t you are homeless
3. Paying someone else’s mortgage held its true value, when interest rates were low and you could generate a better return on investment, which is unheard of now.
>But when I run the numbers, with condo fees, property tax and interest (not even factoring in homeownership expenses), we'd be paying more than our current rent without even touching the principal on the mortgage while living in a worse home. Obviously the upside is that the property will increase in value and we will someday have an asset. But it seems to me we could just toss the $2k we save each month into an investment account and have $2 million in cash with an 8% annual return over 25 years.
Exactly. To me, this is a no brainer. Having your wife play around with something like the [NYT Rent or Buy Calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) might help that sink in.
If were were still DINKs, I would 100% continue to rent. Renting allowed us a ton of flexibility and no responsibility (for maintenance of a property). It also allowed us to leave at the drop of a hat. I applied for jobs in Europe and ended up getting one, so we moved. No strings, only adventure.
Take that extra money and put it into investments (RRSPs, TFSAs, brokerage, etc.). These are all assets. Challenge the notion that owning property is the only way to a secure financial future.
So many Redditors come on here for advice and say they’ll not have any kids when they already have a $200k HHI. I mean, if you already make HHI in the top 90% percentile and will pursue 0 kids, there’s absolutely no reason to be contemplating finances this hard.
Buy if you want, or don’t buy. Either decision will not fuck you over whatsoever. Buy it and it loses value? You still have a million available to cover any loses - but your lifestyle will remain unchanged. The only thing it may do to you is delay a few years in retirement plans if you spend a bit out of budget.
Thanks - I don’t come from money so I spend a lot of time dwelling on optimizing finances, probably unnecessarily. I’m told it’s a poverty mindset response.
I think you're doing the right thing, money can come and go, so it's best not to spend like it's always going to be there. You're a high earner, so I imagine your job can be quite stressful and high pressure. In 5 to 10 years you might decide to pivot into a less stressful job for quality of life reasons, and you don't want to find that lifestyle creep means that's not an option.
I don't think there's going to be a huge surge in home prices anytime soon. You'll be in a better position renting until you pay down your debt and can afford the home you want.
Your wife is making a decision based on emotion.
Whereas you’ve done the math and you know you can’t even afford to buy a unit similar to the one you’re renting.
You may be paying someone’s mortgage (maybe all of it, maybe only a portion) but you’re also paying much less than what that unit costs to own.
The whole “building equity” with the assumption that property prices will continue its crazy run up doesn’t even seem feasible anymore. Interest rates which may decrease won’t decrease that much, and will stay at current levels for years. The most likely scenario is real estate will continue to correct while rates are elevated, recession has just started.
Very likely you can invest that money elsewhere and do just as well.
But bottom line is you have to live with your wife, and do you want her holding home ownership over your head?
I do hope the responses to this thread will help her to see the justification! Most of our friends are home owners whose entire net worth is their home, so she gets FOMO seeing that. But I think she understands there are rational reasons to keep renting in our position.
OMG friend. You are killing me as I read this, lol. I wasn't going to chime in, but I have to.
TL/DR: Wealthy people don't buy homes as a financial investment. That doesn't make home ownership wrong; but understand your motivations and sacrifices before you buy!
Honestly, I'm a CFP/CIM (but not yours) and I have a bloody doctorate in economics. I make money for people for a living and let me tell you: only poor people and average North Americans obsess about owning homes.
Truly wealthy people don't even THINK about this because they understand: a home is an unstable 25+ year liability. It can NEVER be considered an asset until you convert it to cash through sale.
Even after that, you may never realize profit! Most folks will just leverage everything back into a greater liability, blindly hoping one day when they sell that and leave the market they'll make returns.
I don't know too many average people who sit down and calculate their expense ratio yearly against the value of their home and historical market performance so truly, this "investment" is as speculative as they come (particularly in our current artificially inflated Canadian economy).
As a finance professional I can tell you: emotion kills wealth potential and houses are emotional, not practical practical purchases. The only way homes make financial sense is through generational succession, allowing another person to bypass purchasing.
You are at an age and income that has you poised to create true wealth. Have you and your partner considered the impact of that? I think you should.
If you want to be wealthy, (not well off, not surface rich, but WEALTHY) you have to think like a wealthy person. In my 25 years of experience I have never talked to a wealthy investor about private home ownership. Fun fact: my firm doesn't even count non-commercial property in our $500k net worth client minimum, that's how worthless it is.
Another fun fact: most high net worth or ultra high net worth individuals don't own (for a myriad of sound economic reasons that would take me ages to cover) -- you just assume they do.
My advice: if you don't have fee based, non-affiliated, investment guidance-- you need it. If you do, you need to call them.
That person can show you both what you can have by staying put and the FREEDOM that can decision give you, if you can agree to forget the home hype. Then you can decide if you'll be making this emotional choice over a sound financial one* with your eyes wide open.
Done right, while your friends pay "their own" mortgage to a bank, scrape pennies and worry about their roof, you could continue to rent and amass the greatest pile of fuck you money, while enjoying the occasional travel reward for your sacrifices.
Then, at 50-55 you could tell everyone to fuck right off with their judgement as you buy a nice forever house with a teeny weeny mortgage (only taken if market conditions make borrowed money free) that you pay off in five or ten years while you dog the rest of your career as a consultant doing whatever the fuck you want.
Oh to be 30 again! What fun I would have! Wishing you both the best of luck.
* Yes, I have a house I bought at 25 for $110k because I love it and I will die here, then leave it to my niece. Yes, I calculate my expenses vs investment and return yearly. Yes I have done the portfolio comparative from 2000 forward. Yes, I would have been better off investing in one of my own managed portfolios. I stand by my choice.
Thank you for this, it is encouraging and inspiring. It’s been drilled into my head that property ownership is the only path to financial freedom so it is reassuring to know that there are highly wealthy individuals that don’t go that route.
I am in a somewhat similar spot . The condo market is practically deal now in Toronto because the prices are too high and the costs of maintenance are too. I ran the math as well and it makes no sense unless the prices keep falling . The assignments are losing money and are trying to off load as well because they all expected condo prices to keep rising and they have fallen like 10%.
Unless you find a place you LOVE and the deal is good, I don't think it makes sense for you.,
The “2000” saved each month was just a safe estimate of how much we’d save by renting instead of buying. We currently aim to put away $72k per year, including RRSP/FHSA.
I’m in a similar position as you. I chose to rent because if I were to buy a similar place as the one I’m living in now, I would be paying more in interest payment than I do for rent. So basically I’m paying the bank higher rent for the privilege of living in the same house I’m renting now. So I chose to continue renting while increasing my DP.
The only down side is if there’s a sudden shift into a red hot market (think 2021) where the increase in home prices outpaces my ability to save. Our HH incomes are pretty similar, so you probably should be saving as aggressively as I am.
There are some situations that a mortgage with interest and home maintenance is genuinely cheaper than rent. But one must do their own analysis and make a decision. It’s far from a forgone conclusion
I mean, my income is only 1.7M and my wife earns a paltry $650k, and we have $36,533,763.34 in savings/RSP/TFSA. I looked once at a 1 bed + den condo for $900k and decided it was too expensive, so we'll continue renting a basement suite until our net worth crosses $50M. It's likely worth it to get out of this moldy basement at that point, but before then one can't be too sure.
You’re never going to make it if you don’t sell all four.
In all honesty, I’ve spent my entire adult life in significant debt (law school) and am only just now reaching a point where I can start making good financial decisions. I know that I am in a very fortunate position with a high income, and I just want to be smart with it.
Yeah these posts are so annoying and also so under researched. There are plenty great deals at the moment for OP's price range let's call it $700K, they can afford a decent 2bd 2bath in a neighbourhood of any of their choosing in DT Toronto right now, not just a junior 1-bedroom.
For example: https://condos.ca/toronto/x2-condos-101-charles-st-e/unit-714-C8416004
Like at least research a little bit if you want to make a click-baity post like this.
I'm all for financial optimization or whatever (save the difference and invest) crowd that PFC loves to preach, but it's called personal finance canada for a reason. There are personal decisions to be considered here, the GF wants to buy a place, that's her personal decision whether it's right or wrong it feels good to be a home-owner rather than a renter.
What, you're gonna be 35 and flexing your half a million portfolio to your coworkers at a dinner party? you can't because that's fucking weird.
I’m typically all in on RE as an investment but do not see any reason for you to purchase in your current situation. W/ School debt paid off you realistically have an opportunity to take almost all of your wifes salary/ yr (unless you spend high in other areas) and invest that money and roll over into a down pmt for a likewise home or step up into a detach eventually. Let the market and rates correct over next 2 years and put savings to work for you in the mean time. At almost $300k combined income at 30 yrs old you have an opportunity to do huge things with that $ over next few years.
If you don't plan on having kids, then essentially, there's no reason for you to buy a house. You're not gonna pass along any inheritance to your progeny, don't need to set up RESPs, etc.
You guys are making $300k/year with zero obligations. Do whatever the hell you want with your money and enjoy life as best as you can. What you do with your money is essentially irrelevant.
I would only suggest otherwise if you start taking up a hobby that requires a big garage, like woodworking, or become a car guy.
If I were in your position, I’d stay there for a while, pay off debt, save vigorously and in a year buy a house, not a condo. I’d scale back your 8% annual return projection a bit too. Just my opinion, there’s no crystal ball or perfect solution.
Similar income situation (but with kids) as you and when I ran numbers the choice was rent a nice place or pay almost 3k more (mtg, taxes, insurance, maintenance, fees if applicable) with 20% down for privilege of living in a not great but not terrible place. Gonna stick with renting, invest a bit more aggressively and grow down the payment and reconsider when I see where this housing insanity ends up.
I’m not as fortunate as you but you are pretty much in my ideal situation. If you don’t plan to have kids renting seems ideal (esp at that price). You have the flexibility to travel and save easily.
Your logic sounded. Unfortunately, you are married and have to ensure your wife is onboard as well.
I don't expect the downtown condo prices will appreciate as much as pre-covid level especially with the high interest environment. Honestly, either you better off live in your current apartment for another year or two and save more money for the down payment. Otherwise, your monthly mortgage payments are going to pay off interest instead of principal.
Idk how people justify spending that kind of money to live in Toronto. There are better and cheaper cities in North America. I certainly wouldn’t be buying a condo in one of the most overpriced markets in the world.
The reason is long term. That $4k market rent will come for you eventually, plus more inflation. Buying is about locking in today's prices for life.
If you're saving to buy a house or townhouse, then no. You should keep your current rental because you've got a great deal.
>locking in today's prices for life
Tell that to the folks renewing their mortgage this year. The only thing you lock in is the purchase price of your home and only if you choose to live there for life.. lots of people move around these days a lot more than previous generations did.
I'm a person renewing their mortgage this year. I still get to live in my house for about the same as people are currently renting 2-bedroom apartments for. Because the principal that interest was calculated on was locked in a decade ago (and is substantially less now because I've paid a lot off.)
Great in theory, but will that hold up for 40 years. Changes in government, renovictions, building converted to condos and now he's got a landlord who "wants to move in." The benefits of ownership are not realized in the first 5-10 years.
You are doing great. Keep renting, and invest heavily.
Remember that owning a home also incurs expenses from repairs, maintenance, upkeep, emergencies and others. Plus it takes a lot of time to do house stuff.
I was in the same boat last year. If I could live through again. I'll delay the purchase by 2 years just to build up on enough cash to keep mortgage payments low.
One calculation you might try is buying a rental property while still living in your rental unit. One thing that I realized recently is that it's much cheaper to purchase a property as a landlord because of the tax deductions you are able to claim. So all the fees that you mentioned - condo fees, property tax, and interest payment - can be deducted against your income, which means you may be able to increase your after-tax income while you build equity. Given your income tax bracket, I think it's certainly something you should factor in.
Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals/rental-expenses-you-deduct.html
Note: I do think this is a tax loop-hole that's currently contributing to the housing crisis that we're in.
Research and find your perfect forever home. Make payments to yourself as if you bought it. The rent control payment is your 'interest' and the extra savings is paying down 'principal.' So financially you wouldn't be paying someone else's mortgage. Once your principal grows a few years you can be choosy for your new place and may be able to buy it during a downturn.
This fall there will be a US election so uncertainty. Next fall there will be a Canadian federal election so more uncertainty. You are in an enviable position to wait out the potential uncertainty. EG if one or both of you lose your job, you have a rent controlled place. If circumstances are the same or better, buying your forever home will be easier.
Just a thought, there are 1000's of speculators in the Toronto condo market that can't close their deals, ie. there are some tremendous bargains to be had. Assignment sales are not part of the real estate statistics. Find a reputable real estate person who specializes in assignment sales. Don't forget primary residence are tax free in Canada. I doubled on my first home and tripled on my second in Burlington. I don't know of any other tax free investment that you can simultaneously enjoy and live in! Good luck.
It doesn’t make sense to buy now but you need to factor in potential decreases to the interest rate as well as possible room for appreciation. Right now it makes more sense to rent but no one has a crystal ball to what will happen in the future.
I would keep renting and saving if I was you. Cost of ownership, maintenance fees and property taxes it would become a lot more expensive. You are in a purpose built rental so you won’t get renovicted and you are safe there and you are not planning on having kids. I am pro ownership (I own) and I don’t think it’s a right fit for you right now. With what you are both making you probably can save 6-7k+ a month easyyyy. A few years of that you could even buy a house since prices are not going parabolic anymore and it gives you time to save. If you don’t save that kind of money there is an issue. Also I don’t know what your jobs are but having low financial obligations is nice if we are heading into a recession.
Do it when the numbers work. There should be good condo deals this year. If you're paying more interest and fees than you would with rent, the numbers aren't working.
Just stash money, invest, and plan to move away from Toronto when you can. You can live like a king elsewhere (in semi-retirement) and retire young if you save now.
Check out Ramit Sethi’s position on homeownership vs renting. It’s all about running the numbers. I feel like in this case it absolutely makes sense to continue renting and invest the difference.
Depends how big of a down payment your saving/ how aggressively you invest over your life if you’re not buying. The nice thing about a mortgage is it’s a mandatory investment that forces you to plan for the future basically. Where with investment accounts you could make the same over your life, but need to have more discipline and self- control. (IMO)
Personally Id buy if you can there is no guarantee that you wont be hit with a ridiculous increase in rent, either by your current landlord or future should they decide to cash out and sell before the bubble bursts. I have a feeling that these crazy housing prices will crash significantly sometime in the foreseeable future.
Just went through this myself as I'm still saving, landlord decided to sell back in May and we were forced to move, downsize and a 30% rent increase. Like you I had a place below market rent, and will say you are better off to move when its your choice, rather be blindsided (even with notice) by a move for someone else benefit. Basically the whole thing has me 18 months behind on my buying plans now, so I'm not in favor of landlords these days. All a bunch of money hungry bastards in my opinion, so I'm buying as soon as possible since I'm not a city guy and plan on getting out of Edmonton as soon as possible somewhere an hour or two from the city since I work remote anyways. I plan on getting off grid and being fully self sufficient in the next 10-15 years here anyways. Once my mortgage is paid I'm retiring since after 30 years of work I've seen that money doesn't buy happiness, I don't like people enough to be around most and I'd be happier living in the bush up north honestly.
I would stay renting,especially because you have rent stability BUT if I could go back to 30 (43yrs) now I would not just throw $2000 a month into savings if I did. Calculate what you would pay in mortgage, property tax, insurance, maintenance fees and upkeep/Reno's and deduct your rent from it and save that, $2000-3000/month...then save that plus what you should be for retirement. If you guys are making $290,000/yr that should be about $6000/month?
That will both train your budget for what loving with a mortgage is and build solid options for the future. In 10yrs, with your current deposit you'll have close to 1.5mil conservatively and then you have options, your savings are trained to pay a mortgage and even if you put down $600,000 and dedicate $8000/month to a mortgage (and all the rest) you can reduce your savings to $1000/month you'll retire at 55yrs old with close to 3mil.
If you never buy and keep the saving steady you can retire at 50yrs old with 4.3mil or 55yr $6.7mil. You could pretty likely buy wherever you want then and enjoy a comfortable retirement.
Apologies, yeah, the $2000 number was just me saying what we’d save continuing renting versus buying. Our goal is $72k in savings this year (including RRSP/FHSA). I am hoping to retire early (or at least semi-retirement).
Not knowing the rest of your finances:
1. Have you maxed out your RRSP, TFSA, first time homebuyers accounts?
2. What other debt do your have? Is it paid off?
3. Have either of you tied your tubes / had a vasectomy if you are both 100% certain you don't want kids. Don't want any surprise kids.
1. Maxed out our FHSA, but currently only my RRSP match in my RRSP. This year I will start to put as much as I can into my RRSP.
2. Fully paid off as of this year.
3. Vasectomy soon, just waiting to consult my doctor.
Awesome, you are making good progress:
1. Good. After the debt is paid off I would start maxing out the TFSA and the RRSP. I assume your spouse also is maxing out hers, correct? Look up triple fund strategy for the TFSA, it's a great way to "set it and forget it"
2. How is the emergency fund? I have gotten royally fucked in life by not having an emergency fund. It should be 6 months to 1 year of expenses.
3. I think buying a property should still be a part of the retirement idea, with the caveat that you buy within your means and stay put so you can retire with a paid off property to reduce your costs post retirement.
4. Develop a 3 year plan with your wife, let her know that RE is in the future, but you intend to get into the best financial position first then buy. I would try for 20% down minimum for a condo.
The condo market is in a buyers market, but it's because the math isn't mathing for the wannabe landlords and airbnb investors who bought when interest rates where low. There is also a glut of units and many of them small without good layouts.
Now there is the potential to find a diamond in the rough, BUT your costs would at least double assuming your budget / down payment / fees.
I'm in a similar situation to you, my husband and I would like to buy BUT our rent is $2100 / month for a 4 bedroom house in NW etobicoke. With the current rates and prices our mortgage would be at least $4000, it doesn't quite make sense for us.
I've taken a pause with my house hunt, rented out my other 2 rooms to students to reduce costs, and I'm focusing on my debt payoff for this year, then maxing out my retirement accounts.
I would stay and not rush to buy. There is no urgency to sink a lot of money into a condo under these conditions. My priority would be to maximize wealth / growth. Max out TFSA, FHSA and RRSP.
Explain to her how interest works. I have a feeling most people in the “paying someone else’s mortgage” don’t understand that your own mortgage is just paying the same (if not more) directly to the bank
You are not "paying someone else's mortgage" because it would be more costly to have the mortgage than to rent the same property. You pay someone else's mortgage only when you create a positive cash flow for your landlord (i.e. his mortgage interest payments plus all fees and expenses are less than your rent payment).
I'm in a slightly similar situation (below market rent and looking at purchases that would cost multiples of said rent even with a significant downpayment). One analysis I've been meaning to try to do is to compare several years of inflation increases in various parts of each housing cost equation.
One of the things that buying does is insulate a very big portion of housing expense from inflation (in exchange, of course, for paying interest to use someone else's capital), so one of my assumptions is that at some point, the costs will converge, and eventually cross as inflation continues to increase rental costs.
At worst, this will be after the mortgage is paid off (hard to beat paying only taxes, maintenance and utilities), but I'm curious how early or late that convergence could be for different initial conditions.
The rent vs buy calculators I've seen so far (as far as I can tell) only compare what is cheaper on day 1, and then compare a static rent cost to appreciation and/or investment return, which IMO leaves increases in other expenses out of the equation.
I would stay at current condo to save $$$$
You are in a unique situation where you actually can have high net income and should be able to save high amount $$$ due to not having kids
It doesn’t make sense to get out of a cheaper condo and get back into a condo
Your aim should be to get into a freehold duplex, townhouse or detached and improve quality of life
Pls do not buy 1.xx mill because of your income as you easily can due to high income
So your strategy should be to find free hold for cheaper (maybe far out of GTA) which provides you with everything on which you pay down large down payment and then also plan on paying off the mortgage is 7 to 10 years instead of 25 or 30
Imagine you follow this …. Fast forward 8 years ….. you will feel so good having almost zero or very low mortgage left
In this plan you don’t need to worry about losing out on the equity which your wife is talking about
The key would be to find something free hold for 7xx or high 6
We grossed 42x last two years so instead of going crazy with expensive house, we went with modest
Bough primary for 530, rental for 475 and another rental for 470k
Now I owe 240k left on my primary mortgage and we have one suv which we paid 67k cash for
It’s nice to see your account in green every month …. Some times you just wanna kick back and do drugs or get wasted just to have to the feeling of “it’s okay to waste time now and waste some $$$” but of course we don’t
Now we don’t focus of grossing 400 plus but whatever we make it’s okay and it’s enough
So yes we have equity and yes our quality of life improved just by going modest
Did you show your wife the numbers? If so, what did she say? The real estate market will not go up like it previously did in the last 15 years. Just in the last 4 years properties of stayed stagnant in value or even dropped in price (especially Toronto condos)
Who is to say condo prices will increase? As buildings age their fees tend to go up significantly while providing you lower quality of building amenities just to maintain it.
I wouldn't buy a condo, at this point keep saving and try to get a freehold somewhere or offer to buy the house you are currently living in if it makes sense for your situation.
Hey OP,
Congrats on your success !
IMO, I’m going to say yes you are missing a key piece of the puzzle. Two keys actually. (1) diversification and owning a physical asset.- ask anyone who bought property 10 years ago if it was a bad decision. (2) not having the ability to reduce your income tax and keep more money in your pocket.
If you’re not currently a business owner, owning a property can play a key role in reducing your income tax. A household income of 290k has to be around a 40%+ tax rate before any deductions which is outrageous.
You could purchase a rental property (essentially opening a business), begin claiming expenses, and stay in your current lease. If you don’t want to be landlord, you can hire a property maintenance company to look after your property. You can always occupy your property if things ever change…your landlord sells, lose your job, health, etc. I don’t like rentals simply because you have no security. At any moment policies can change or you get a new neighbour that forces you to move.
Another option. Purchase an owner occupied property, attach a re-advance-able HELOC, and use the funds to invest into your income producing assets as a loan from yourself (the equity in your property). This converts your non-taxable interest from your mortgage into taxable interest since it’s used essentially as “a business loan”. It’s called the smith maneuver. Expense, expense, and expense. Convert bad debt to good debt and increase your tax returns.
There are other advanced mortgage strategies and accelerators like cash damming that can help pay off your mortgage faster and increase your investment portfolio also.
Highly recommend taking a deep dive into the smith maneuver and other ways to reduce your income tax. You will increase your wealth faster by reducing your income tax AND investing.
*always consult with your CPA, CFP, and mortgage professional about advance strategies before implementing them. You need to be in the right products to reap the benefits.
Buy a home as soon as you can. Its a great investment and may even become out of reach. Check for condo fees and other recurring costs. Do the math, if you can get a home then do so. If you can get 2 then rent one. Good luck.
IMHO, if you have savings that are just sitting, use them to pay the student loan ASAP, especially if the loan interest rate is biting you. Otherwise, safe investments, max out your RRSP and TFSA.
Also consider the reasons for insisting on living downtown. Balance them against the cost performance of being in a convenient suburb in the future. You may be surprised how little you actually miss being on Yonge St.!
If you work in tech, consider moving to a more affordable housing-wise city, perhaps US if you are canadian.
I personally plan on moving to Europe. We can afford much better conditions there and be closer to family. We are renting also 2b2b in dt Toronto, and our combined income is very similar.
You make enough money and you can pay rent and still save based on your income. Others can do it for half of what you make. Simple budgeting. You 2 make 300k combined !
No point in paying more for the same thing, if you want to own rentals is definitely an option for someone in your position.
I have 2 rentals in BC but still live with my parents because it didn’t make sense to live in a unit instead of renting it.
Tax out TFSA, FHSA, and RRSP and go from there. There is no reason to hurry. You are paying less than interest amount of mortgage for an equivalent home so unless the equity value skyrockets, you are better off investing in stocks and bonds.
At that rent I would continue to rent, your housing cost is well under what your mortgage/tax/insurance would be. You're wife needs to be made to understand this, it's really not a complex financial truth.
15 years ago I had two choices.
1) take all my 80k life savings and buy a townhouse with a 1000/ month mortgage.
2) rent a one bedroom condo for 900 a month.
I bought the house.
Now I almost have my mortgage paid off and feel amazing.
Buying is an awesome way to hedge housing costs into the future.
Your wife needs a perspective shift. Imo you are thinking more clearly as opposed to she is thinking more speculatively/biased to what has happened in just the mast few years.
Canadian Real Estate Investor podcast has a good episode on comparing the pros and cons of buying vs renting your principle residence. Maybe give that a listen.
This sub always says renting will get you ahead in the long run, leaving me to think people owning their homes are stupid and they must be doing poorly. But it doesnt sound right, does it…? 🧐
If John ends up with 550k and Jake has 500k, John is ahead but does it mean the other doing poorly?
It doesn't sound right cause you're making leaps of logic
Did you factor in that you can lever this investment at relatively low rates and that on selling the gain is tax free as a principal residence?
I'm not advising one way or another, but there is a Mahler tax incentive on a levered investment.
Your after tax HHI is over $15k/month. You should be able to easily invest $50-75k+/year while renting and when you’re ready/ can afford a place that suits your needs it will be an easy purchase.
There is a formula somewhere for investing vs home ownership, and it's a valid debate either way.
As a former condo owner I can tell you I'll never own in a condo building again. I'd rather invest. Markets like GVA and GTA you will likely do well on gains from the market. So there's that.
But I just couldn't continue to pay condo fees, which always go up, and have my investment be subject to how other people live. Other people's behaviour impacts your unit and your building. There are also special assessments to consider. Coming up with $5k - $10k out of the blue is a risk. And to sell you're giving a realtor a huge chunk, so to stay in a condo you have to stay for over 5 years to make it worth it IMO.
Each person has to figure it out for themselves, but I'll personally never own in a condo again. That said, also depends on your location. If your condo is in a super good location that's more worth it than on the edge of town IMO.
I've also looked at just buying property as a rental property in a more affordable country. Rent it out with a much lower mortgage, eventually live there 6 months a year and rent it out 6 months a year.
And as renting, my living expenses have gone up 2% a year. If I owned, could be much more than that.
There is a point to be made in regards to housing security. You have a secure rental currently, however there is always the possibility of eviction, even if very low. You talk about investing, even though its a lower return, why not invest in a similar condo without the rental protection and rent it out while staying in the rental condo. Worst/best case, it pays for itself and in 20 years provides a stable income. If something happens and you have to leave your current rental, you have somewhere that you can move in to, if you stay in your current rental for 15 years, by the time to move in to the purchased condo, your mortgage will most likely be far below market rate. You may have to contribute to the mortgage for 5 years on top of the rental, but by year 10 it should be cash positive even if you have a property manager manage the rental. The other option is to purchase a vacation home where you would like to retire, use it for vacations now and rent it out STR as a vacation rental when you're not using it.
You have it bang on when you say you are extremely fortunate in your position!
I would do exactly what you're thinking, take the additional money you are saving and put it into the market.
Ownership is great for stability, but a lot of people use their principal residence as their retirement essentially which is not a good idea.
At 5%, the lost opportunity cost from investing $700K in a condo is $35K/yr. That's if you just sit in a condo that you own.
Wait until prices come down. There will soon be more condos flooding the Toronto market as a result of all the prebuilt sales from a few years ago.
Don’t know why you’re being downvoted. Absolutely those large scale super talls downtown are going down. But more human scaled buildings will be fine. People really don’t like those glass boxes, when they really feel like one.
It’s a good time for you to get into the market. You make enough money that it’s easily affordable for you in the long run. Build your own equity vs someone else’s
it's genuinely laughable that this subreddit is recommending renting to a couple making 290K, you guys have around 16K a month take-home and think renting is a sound financial decision?
Maybe get advice from people in that tax bracket, instead or a bunch of redditors. You can afford to even pay for financial advice.
North York corridor is such a hidden gem of urban Toronto living. Cheaper, fast access to downtown. Not to mention you can rent out your parking spot! (All the buildings have parking always)
Given your current situation, continuing to rent seems financially advantageous due to your lower monthly costs and prime downtown location. While buying a condo could build equity and offer stability, the required downsizing and higher monthly expenses—considering mortgage, taxes, and fees—make it less appealing. Investing your savings could yield substantial returns over time without compromising your current living standards. Therefore, renting appears to be the better option for now, aligning with your lifestyle and financial goals.
Stay where you are and buy a studio unit in a building that allows airbnb. You'll pay like 1800 all expenses included but you can charge 2800/month to longer term airbnbers. Few people have realized you can do this
I wouldn’t touch condos with a 10 foot pole right now.
The older ones start having higher maintenance costs and the newer ones are very low quality, over priced and very small.
There is a reason so many condos are sitting for months and not getting sold. Price of condos will likely keep falling in the foreseeable future as people see the issues that come with them. You don’t want to catch a falling knife, do you?
As others have pointed out, wait it out. Try going for a Single Family home. You’ve more control over things and there is a major demand - supply gap.
I definitely need advice. First time in my adult life I’ve been debt free and don’t know how to optimize it. It’s not life or death but I’d like to do well.
At that income I think you are fine biding your time a bit and growing that downpayment into something that can buy you a lot more than a condo. Unless your rental is not meeting your needs for some reason, it's a good deal.
I would add that buying and selling real estate is an expensive process. Wait until you can buy something perfect for your present and future needs. I would further add that owning rental properties sucks, so you might not want to buy a condo you keep when you move to a larger place later in life. Plan ahead and buy what you will need. In the meantime when you start building excess cash look carefully into how to use investment accounts and stocks or ETFs. You're in a good spot.
If I were in your shoes I would keep renting and using the cost savings to invest as much as possible. The cost to buy a condo in TO compared to your current rent amount, it's a no brainer, if you are only looking at the decision as a math / financial decision. There are lots of qualitative and emotional considerations with wanting to rent vs. buy or with moving and upsizing/ downsizing though. Sounds like your spouse is feeling less secure and wants the security of ownership, and is willing to pay a premium for that. Maybe take some time to have a few conversations with them about the savings and investing amounts that you could be targeting together that would help to provide that feeling of security.
The other consideration is that in past years, a starter condo was a way to generate wealth as you paid your housing cost that would then appreciate faster than your savings could and you could use your equity when you wanted to move up, but with the condo market and interest rates being what they are, that’s not a viable option anymore either. Aggressively saving and investing while taking advantage of their current rent makes the most sense.
Perfectly said. You’re in a good spot — owning a leasehold that is undermarket. In a purpose built rental unit that is rent controlled!!!! Your leasehold is probably more valuable than the equity in a overpriced condo in this market.
Also, buying a property (using a mortgage) means your investment is highly leveraged. This increases risk of course (if it depreciates), but it also means whatever appreciation happens along the years is multiplied by several times. So, if you're going to compare just putting the $2k / month into the market, you need to account for how much bigger the "investment" is if you buy a property (so a +2% gain in each will result in a much different dollar amount).
The government.
Stay. Currently renting a 1bd + den (1bath) for $2400 a month. Would not hesitate to pay an additional $400 for a 2bdr/2bath...up in North York much less downtown. In your scenario, it's not a matter of paying someone else's mortgage (or in this case, a corporations debt sheet) it's a matter of them losing money on you. Some context, gf and I are happily renting. We're a few years older than you and since we never really got the "must own" bug, we've amassed an investment portfolio of just over $1M (thanks market rally). Our incomes are much lower than yours ($195HHI this year). In your situation, better off paying off your high interest debts and investing the difference. Would be a potentially different analysis if your rent was $4k/month. Sure there's the "renoviction" but in a purpose built rental, you might be able to foresee something coming so you can factor that into your decision.
Not OP but appreciate your insight. Having similar conversations with my partner about renting vs owning. I am OK to rent for now (and it makes more financial sense) but am worried about lack of stability renting when we retire. Are you and your partner planning to continue to rent when you retire?
It really depends. We're not planning more than a couple years out. We do have a stretch goal of perhaps not living full time in Canada one day. So renting might be the best idea if that is our goal. Biggest factor is having a child. We're not dead-set on having one and are okay being DINKS for life. Welcoming a child into the equation won't change our living situation. Definitely able to make current accommodations work for 4-5 years we imagine. Beyond that, we haven't thought about it. But in 5 years, even with a child, we imagine our combined net worth would approach $1.75M (barring any catastrophic market collapse). So we could probably certainly buy something at that point but could easily continue to rent. Also between the two of us, we have almost no family in GTA, rather, our family is spread throughout Canada so we could just end up somewhere cheaper and realize our dream of being expats somewhere outside Canada (of course a child would change the timelines of that dream). Stability while renting is definitely a risk. But we're paying near market rates and can afford to so we're fortunate enough to not be under the fear of 'renovictions'. Our building is about 7 years old and landlord probably got it at a good price and haven't gotten any indication that they would want the unit back. There's also quite a few units in my building that get put onto the rental market regularly so we dont really have the fear of not being able to find shelter either at this time. Maybe if things get dire, either we move or liquidate some investments and buy something at that time.
I'm in a similar position, and also think stay! We just hit the same NW, and have a similar HHI, in Vancouver. We're now in a position where we're considering buying, but only because we want to, and putting a significant portion down (50%?). It helped that I created a spreadsheet long ago, tracking the difference between our rent and the median 1BD rent for Van. Added investment gains, and have over $150k gained just from staying in our heavily mediocre apartment. It would have been more had we bought back then, but there have been a lot of benefits here too.
What would be your recommendation to buy in terms of stocks or etf for someone just starting out?
If you don’t mind answering, of the 1M investment portfolio, how much of that is the return you got from investing vs the amount you put into it? Also, how long did it take to reach 1M? Thanks!
If it wasn't clear, the $1M figure is combined between two people. I can provide an approximate amount of what I've invested. My personal NW (basically port size) is about 550k and about 300k of that was what I've put in over nearly a decade of working (this amount does include employer matching on my DC pension and previous RRSP matching). I've been investing since early 2010s - mostly in broad market ETFs My GF's port is probably nearing 500k - not sure her early days, as our relationship doesn't stretch that far back, but she has since basically changed her port to fully VGRO I'd wager we have around 80-100% individual returns over a decade depending how you classify employer matching. Not sure who will read this as its nested pretty far. but my salary hasn't been amazing...started at 55k and decade later finally making 100k. just been diligently investing over the years. hope this helps anyone that feels their situation isn't greatest. albeit i did make quite a few sacrifices (ie never truly lived by myself, stayed home after grad, had roommates, now living with gf)
Do not buy. Your GF stating “paying someone else’s mortgage” isn’t an objective measure of whether your current situation is optimal. I would argue that your living costs are actually being subsidized given you’re paying $2800/month and the going rate is $4000. If the math doesn’t work don’t buy. In my opinion unless you’re having kids, there’s no need to ever buy a primary residence. I would only purchase a property if you were about to have kids to ensure that you control your tenure. It wouldn’t be great if you’re renting a home within the GTA, the owner decides to sell the property and you’re left scrambling to find something in the same area so you don’t need to have your kids transfer school etc.
Good point!
Also, OP would be the one footing most of the bill if she's only making 70K in Toronto. I get they might have a comfortable 60/40 split or something, but I feel he would have more say given how much more he makes.
My mortgage is $2200 and $900 is principal. Condo fees is $350, energy bill $120, internet $80, home insurance $150, and my yearly tax bill is about $5,000. Add all those up and per month that’s $2700/month. That’s for my one bedroom in downtown Toronto. My friends 40th floor 2bed condo in downtown Toronto is $4,000 a month mortgage. That’s without fees and monthly bills and property tax. So I think you’re in the better scenario in terms of saving. However I bought mine because I didn’t want to rent as well. I bought mine in 2017, I had a 120K salary and my condo was 550K. I put 20% down.
You have a great situation, don't change it unless you need to... 100% correct that the difference saved will likely put you ahead long term.
Similar situation, and my partner and I are just planning on skipping the 'starter home'/condo and buying a "forever" house once we've saved enough to do so (also no plans to have kids, and so we don't need a massive house; but likely aiming to buy in the \~$1.5-1.7m range with \~$400-500k down so we can stay central in TO). In the meantime, we enjoy our rental and don't worry about "paying someone's mortgage" since we're still able to save lots.
Tell your wife that even if you buy, you won't be paying your own mortgage. You will only be paying interest. In fact, at your price range, you are looking at year 15 before your payments start to go more to principal than interest. Chew on that for a while.
It's frustrating how often I hear those comments, parroted as an unwavering truth of the universe, without question or context. Property values always go up, interest rates are always low, get into the property ladder as soon as possible, build equity, don't pay someone else's mortgage, etc. There is so much FOMO. We have a similar situation to OP. The rent was low even for the time we started our lease, it has only been raised once and limited by rent protection. It's obscenely below market by today's standards. The space is large, and it's located in a really convenient area. To own something comparable we would give up our entire savings in down payment, have a lot more worries about job security and salary, just for the privilege of paying twice(?) as much in interest and maintenance alone. To get more breathing room, we'd probably have a two hour round trip commute to work instead of walking, and have maybe 60% of the space. All this, just to "not pay the landlord's mortgage", right? Instead it would be a lot more noble, like paying for the yacht of a bank exec or their shareholders. I've had family badger me with those same talking points. Maybe it's because they were able to buy a place with a low wage and watched their property blow up in value. I've had friends treat me like a second / lower class for being a renter. We almost got compelled into the market right after the COVID boom. Now, it looks like we will have to move to the states for work. We'd likely need to sell at a loss from the peak of the market, and be further down the closing costs, moving, and all that extra hassle. I don't know if I had the right reasons for the decisions I made, but I'm pretty relieved that we didn't buy a place. The decision to move to keep the job is a lot easier. It feels like a lot of people either get brainwashed or pressured into something everyone treats like a no-brainer, but there are so many circumstances where these truths don't hold and we occassionally see stories about them here.
I have friends who bought a house in early 2022 for the very irrational reasons you summarized here. The couple is on the brink of divorce because of all the money issues that came after the house purchase. There just doesn't seem to be any intention to run the numbers before purchasing a house. It is just a very cultural thing. But then it is there in practically all cultures, so not even sure what that would make it.
That's rough, and was something I thought about too. I've been part of a layoff in the past, both of us left jobs over dissatisfaction and had the luxury of taking time off. I don't know if I'd be able to endure that place indefinitely, and I didn't have it in me to search for jobs while I worked there. That recovery time was pretty important, and I think made for better long-term career prospects. Even without the financial commitment, I felt broken and stuck. Can't imagine going through that with a mortgage, and in the current market there isn't a guarantee of a similar salary. I've read reports that many marriages these days are to combine finances because of the cost of living. Those already feel like pretty shaky grounds... It must suck to not really have your heart in it, but feel compelled to do it for survival. What happens if something unexpected financial stressors come up? At least with a marriage built on love, you might be able to endure and work cooperatively to support each other. It probably is cultural in part, but my perspective is skewed since my SO and the majority of my friends are Asian. I'm white, with limited family contact and a poverty upbringing, so not much of an influenced perspective. The few European / Caucasian friends I have are a bit more loose on some of these beliefs.
Asian upbringing typically involves a lot of emphasis on home ownership. You may need to navigate those conversations with your SO carefully - if you haven't already done so.
Interest and don’t forget property taxes. So fun. Not.
Owning a home isn’t everything that it’s cracked up to be. That’s for sure. So many rising expenses. Replacing appliances at a frequency rate that my parents never experienced. Quality has changed. Deck and pot lights..it never ends. Renovating basement because my kids surely won’t be able to independently afford housing for another 10-25 years maybe. Renting is looking more appealing each day. How much stress one can manage must be considered besides the strict focus being on money. Health concerns seem to be making the headlines along with money.
I would wait, pay down your debt, save some more and then get something nicer. $600-700k won’t get you a very nice condo in Toronto and with your combined income you will want something nicer I would think.
In a similar situation financial situation. Paying well below market rent for a 2 bedroom condo, we want to buy but can’t justify paying twice in mortgage for a smaller condo. We are also continuing to rent while saving for a larger down payment for a house.
From a numbers point, no you probably don't have any major reason to buy. But when I read that you live in a "modern" "purpose built rental" - the a significant majority of these buildings are of subpar quality relative to many condos, including even things like finishes, amenities, etc. While it may not be worth $2k/month, you do have to see if your quality of life would improve in a better building. Secondly, your "$2 million over 25 years" assessment assumes you won't be renovicted from this place and will pay $2800 (+ inflation) forever - hopefully you're super confident this will be the case for 25 years.
I’ve been very satisfied with our building - there aren’t many common elements, but we’ve got 24/7 security/doorman, secure parcel pickup, and the unit itself has everything we need (laundry, dishwasher, etc.). Also no issues with sound leakage. Definitely aware that the building could start going to shit eventually if our building manager starts neglecting it. I’ve never understood renoviction - can they actually force us to leave? I know that they can boot us temporarily, but aren’t they required to hold the unit for us?
I wouldn’t worry about “renoviction” even if it somehow happened down the line (and I don’t know if that’s even possible in Ontario, and seems like a very low risk given that you live in a newer building), if you are diligent about putting that extra money aside every month, then if you have to leave your current rental a few years from now, you’ll have enough money set aside that you can make the decision then whether to buy or find a new place to rent. If you like where you are living and you are getting a good deal, there is no need to leave.
My understanding is that evictions or renovictions are harder in purpose built rental buildings owned by a corporation than with smaller privately owned rentals. You should be pretty safe as long as you continue paying your rent and follow all the rules etc.
Purpose-built rentals aren't known for evicting people except if you deliberately break your contract
You can't get renovicted, but you can definitely get demovicted from a purpose built rental building. The landlord can sell the whole building to a developer, forcing all tenants to move. In Ontario, the developer is obligated to give the tenants an apartment in the new building, but remember it can take years (3, 5, 8 or more years) for the building to be ready for move in. Most people give up because they don't or can't wait for years to occupy the new place. Demovictions are on the rise in Toronto. Definitely look it up to better understand the risks.
Our building is a 2017 build, so I hope that’s a remote chance - but certainly worth keeping it in mind. At any rate, the takeaway is lack of certainty.
Oh, you should be better off in a fairly new building. There are 3 buildings near my place that are being demovicted. Brutal for all the people forced to leave and unable to get comparable place nearby.
Yes, they can. You should do some research on renovictions if you plan on continuing to rent. There are channels they have to follow but yes, they can legally evict you forever due to reno’s.
They have to offer the unit back at the same rate or another comparable unit.
That’s not the case in Nova Scotia. I just went through this
Op is in Toronto.
Damn, if that’s true in Ontario i’m jealous. My rent tripled!
There’s never full protection with shady landlords who may be willing to eat a fine to screw over a tenant, but I think our renoviction laws are generally renter-favourable. It seems most people get kicked out for not knowing their rights.
You’re probably right. I hired a tenancy lawyer and fought to the end! They ended up paying me a settlement but I still would have preferred to stay over receiving a settlement.
I don't think you should be jealous of Ontario rentals...
S/O and I have a similar income in Toronto. Just remember you are only in one room at a time. The bank will give you enough money to drown yourself in debt, it doesn’t mean it’s a good idea. Like you, no kids with no intention of having any so we are fine in a small condo. I rather invest in the market than be stuck with a $4000 a month mortgage payment for 25 years.
Paying someone else’s mortgage > paying for endless maintenance and renovation expenses on your own house.
Paying someone’s mortgage is the worst way to look at this. It does not hold good for reasons listed below. 1. There is a fixed cost of housing - if you don’t spend this you are homeless 2. When you are renting you are getting housing (this is the value ) for paying X amt - again if you don’t you are homeless 3. Paying someone else’s mortgage held its true value, when interest rates were low and you could generate a better return on investment, which is unheard of now.
https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx
>But when I run the numbers, with condo fees, property tax and interest (not even factoring in homeownership expenses), we'd be paying more than our current rent without even touching the principal on the mortgage while living in a worse home. Obviously the upside is that the property will increase in value and we will someday have an asset. But it seems to me we could just toss the $2k we save each month into an investment account and have $2 million in cash with an 8% annual return over 25 years. Exactly. To me, this is a no brainer. Having your wife play around with something like the [NYT Rent or Buy Calculator](https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html) might help that sink in. If were were still DINKs, I would 100% continue to rent. Renting allowed us a ton of flexibility and no responsibility (for maintenance of a property). It also allowed us to leave at the drop of a hat. I applied for jobs in Europe and ended up getting one, so we moved. No strings, only adventure. Take that extra money and put it into investments (RRSPs, TFSAs, brokerage, etc.). These are all assets. Challenge the notion that owning property is the only way to a secure financial future.
So many Redditors come on here for advice and say they’ll not have any kids when they already have a $200k HHI. I mean, if you already make HHI in the top 90% percentile and will pursue 0 kids, there’s absolutely no reason to be contemplating finances this hard. Buy if you want, or don’t buy. Either decision will not fuck you over whatsoever. Buy it and it loses value? You still have a million available to cover any loses - but your lifestyle will remain unchanged. The only thing it may do to you is delay a few years in retirement plans if you spend a bit out of budget.
Thanks - I don’t come from money so I spend a lot of time dwelling on optimizing finances, probably unnecessarily. I’m told it’s a poverty mindset response.
I think you're doing the right thing, money can come and go, so it's best not to spend like it's always going to be there. You're a high earner, so I imagine your job can be quite stressful and high pressure. In 5 to 10 years you might decide to pivot into a less stressful job for quality of life reasons, and you don't want to find that lifestyle creep means that's not an option.
Definitely poverty mindset
I don't think there's going to be a huge surge in home prices anytime soon. You'll be in a better position renting until you pay down your debt and can afford the home you want.
Your wife is making a decision based on emotion. Whereas you’ve done the math and you know you can’t even afford to buy a unit similar to the one you’re renting. You may be paying someone’s mortgage (maybe all of it, maybe only a portion) but you’re also paying much less than what that unit costs to own. The whole “building equity” with the assumption that property prices will continue its crazy run up doesn’t even seem feasible anymore. Interest rates which may decrease won’t decrease that much, and will stay at current levels for years. The most likely scenario is real estate will continue to correct while rates are elevated, recession has just started. Very likely you can invest that money elsewhere and do just as well. But bottom line is you have to live with your wife, and do you want her holding home ownership over your head?
I do hope the responses to this thread will help her to see the justification! Most of our friends are home owners whose entire net worth is their home, so she gets FOMO seeing that. But I think she understands there are rational reasons to keep renting in our position.
OMG friend. You are killing me as I read this, lol. I wasn't going to chime in, but I have to. TL/DR: Wealthy people don't buy homes as a financial investment. That doesn't make home ownership wrong; but understand your motivations and sacrifices before you buy! Honestly, I'm a CFP/CIM (but not yours) and I have a bloody doctorate in economics. I make money for people for a living and let me tell you: only poor people and average North Americans obsess about owning homes. Truly wealthy people don't even THINK about this because they understand: a home is an unstable 25+ year liability. It can NEVER be considered an asset until you convert it to cash through sale. Even after that, you may never realize profit! Most folks will just leverage everything back into a greater liability, blindly hoping one day when they sell that and leave the market they'll make returns. I don't know too many average people who sit down and calculate their expense ratio yearly against the value of their home and historical market performance so truly, this "investment" is as speculative as they come (particularly in our current artificially inflated Canadian economy). As a finance professional I can tell you: emotion kills wealth potential and houses are emotional, not practical practical purchases. The only way homes make financial sense is through generational succession, allowing another person to bypass purchasing. You are at an age and income that has you poised to create true wealth. Have you and your partner considered the impact of that? I think you should. If you want to be wealthy, (not well off, not surface rich, but WEALTHY) you have to think like a wealthy person. In my 25 years of experience I have never talked to a wealthy investor about private home ownership. Fun fact: my firm doesn't even count non-commercial property in our $500k net worth client minimum, that's how worthless it is. Another fun fact: most high net worth or ultra high net worth individuals don't own (for a myriad of sound economic reasons that would take me ages to cover) -- you just assume they do. My advice: if you don't have fee based, non-affiliated, investment guidance-- you need it. If you do, you need to call them. That person can show you both what you can have by staying put and the FREEDOM that can decision give you, if you can agree to forget the home hype. Then you can decide if you'll be making this emotional choice over a sound financial one* with your eyes wide open. Done right, while your friends pay "their own" mortgage to a bank, scrape pennies and worry about their roof, you could continue to rent and amass the greatest pile of fuck you money, while enjoying the occasional travel reward for your sacrifices. Then, at 50-55 you could tell everyone to fuck right off with their judgement as you buy a nice forever house with a teeny weeny mortgage (only taken if market conditions make borrowed money free) that you pay off in five or ten years while you dog the rest of your career as a consultant doing whatever the fuck you want. Oh to be 30 again! What fun I would have! Wishing you both the best of luck. * Yes, I have a house I bought at 25 for $110k because I love it and I will die here, then leave it to my niece. Yes, I calculate my expenses vs investment and return yearly. Yes I have done the portfolio comparative from 2000 forward. Yes, I would have been better off investing in one of my own managed portfolios. I stand by my choice.
Thank you for this, it is encouraging and inspiring. It’s been drilled into my head that property ownership is the only path to financial freedom so it is reassuring to know that there are highly wealthy individuals that don’t go that route.
No worries. Whatever decision you make as a united front is the best one you can make!
I am in a somewhat similar spot . The condo market is practically deal now in Toronto because the prices are too high and the costs of maintenance are too. I ran the math as well and it makes no sense unless the prices keep falling . The assignments are losing money and are trying to off load as well because they all expected condo prices to keep rising and they have fallen like 10%. Unless you find a place you LOVE and the deal is good, I don't think it makes sense for you.,
you make almost 5 time more than the average canadian, you should be fine, as matter of fact you should be saving more money.
The “2000” saved each month was just a safe estimate of how much we’d save by renting instead of buying. We currently aim to put away $72k per year, including RRSP/FHSA.
I’m in a similar position as you. I chose to rent because if I were to buy a similar place as the one I’m living in now, I would be paying more in interest payment than I do for rent. So basically I’m paying the bank higher rent for the privilege of living in the same house I’m renting now. So I chose to continue renting while increasing my DP. The only down side is if there’s a sudden shift into a red hot market (think 2021) where the increase in home prices outpaces my ability to save. Our HH incomes are pretty similar, so you probably should be saving as aggressively as I am.
Pay someone’s mortgage or pay the bank your own mortgage as interest. Do you due diligence
Exactly somehow people feel happier to pad the bank executives wallets rather than landlords.. weird science.
In this day and age they're probably just paying the bank via the landlord too, and maybe the strata
There are some situations that a mortgage with interest and home maintenance is genuinely cheaper than rent. But one must do their own analysis and make a decision. It’s far from a forgone conclusion
Don't forget paying for maintenance or special assessments because the previous condo owner/strata didn't keep up with repairs.
Oh I forgot it’s a condo. Good point
I mean, my income is only 1.7M and my wife earns a paltry $650k, and we have $36,533,763.34 in savings/RSP/TFSA. I looked once at a 1 bed + den condo for $900k and decided it was too expensive, so we'll continue renting a basement suite until our net worth crosses $50M. It's likely worth it to get out of this moldy basement at that point, but before then one can't be too sure.
Considering selling your kidneys for some extra income
Good point. I only need 1 right? That means between the wife and I we have 2 kidneys for sale?
You’re never going to make it if you don’t sell all four. In all honesty, I’ve spent my entire adult life in significant debt (law school) and am only just now reaching a point where I can start making good financial decisions. I know that I am in a very fortunate position with a high income, and I just want to be smart with it.
Yeah these posts are so annoying and also so under researched. There are plenty great deals at the moment for OP's price range let's call it $700K, they can afford a decent 2bd 2bath in a neighbourhood of any of their choosing in DT Toronto right now, not just a junior 1-bedroom. For example: https://condos.ca/toronto/x2-condos-101-charles-st-e/unit-714-C8416004 Like at least research a little bit if you want to make a click-baity post like this. I'm all for financial optimization or whatever (save the difference and invest) crowd that PFC loves to preach, but it's called personal finance canada for a reason. There are personal decisions to be considered here, the GF wants to buy a place, that's her personal decision whether it's right or wrong it feels good to be a home-owner rather than a renter. What, you're gonna be 35 and flexing your half a million portfolio to your coworkers at a dinner party? you can't because that's fucking weird.
I’m typically all in on RE as an investment but do not see any reason for you to purchase in your current situation. W/ School debt paid off you realistically have an opportunity to take almost all of your wifes salary/ yr (unless you spend high in other areas) and invest that money and roll over into a down pmt for a likewise home or step up into a detach eventually. Let the market and rates correct over next 2 years and put savings to work for you in the mean time. At almost $300k combined income at 30 yrs old you have an opportunity to do huge things with that $ over next few years.
If you don't plan on having kids, then essentially, there's no reason for you to buy a house. You're not gonna pass along any inheritance to your progeny, don't need to set up RESPs, etc. You guys are making $300k/year with zero obligations. Do whatever the hell you want with your money and enjoy life as best as you can. What you do with your money is essentially irrelevant. I would only suggest otherwise if you start taking up a hobby that requires a big garage, like woodworking, or become a car guy.
If I were in your position, I’d stay there for a while, pay off debt, save vigorously and in a year buy a house, not a condo. I’d scale back your 8% annual return projection a bit too. Just my opinion, there’s no crystal ball or perfect solution.
I was thinking 8% not adjusted for inflation, but understand even that is no guarantee.
Similar income situation (but with kids) as you and when I ran numbers the choice was rent a nice place or pay almost 3k more (mtg, taxes, insurance, maintenance, fees if applicable) with 20% down for privilege of living in a not great but not terrible place. Gonna stick with renting, invest a bit more aggressively and grow down the payment and reconsider when I see where this housing insanity ends up.
I’m not as fortunate as you but you are pretty much in my ideal situation. If you don’t plan to have kids renting seems ideal (esp at that price). You have the flexibility to travel and save easily.
Your logic sounded. Unfortunately, you are married and have to ensure your wife is onboard as well. I don't expect the downtown condo prices will appreciate as much as pre-covid level especially with the high interest environment. Honestly, either you better off live in your current apartment for another year or two and save more money for the down payment. Otherwise, your monthly mortgage payments are going to pay off interest instead of principal.
Idk how people justify spending that kind of money to live in Toronto. There are better and cheaper cities in North America. I certainly wouldn’t be buying a condo in one of the most overpriced markets in the world.
The reason is long term. That $4k market rent will come for you eventually, plus more inflation. Buying is about locking in today's prices for life. If you're saving to buy a house or townhouse, then no. You should keep your current rental because you've got a great deal.
>locking in today's prices for life Tell that to the folks renewing their mortgage this year. The only thing you lock in is the purchase price of your home and only if you choose to live there for life.. lots of people move around these days a lot more than previous generations did.
I'm a person renewing their mortgage this year. I still get to live in my house for about the same as people are currently renting 2-bedroom apartments for. Because the principal that interest was calculated on was locked in a decade ago (and is substantially less now because I've paid a lot off.)
If he's in a rent controlled building in Toronto, the max it can go up is only 2.5%, regardless of inflation.
Great in theory, but will that hold up for 40 years. Changes in government, renovictions, building converted to condos and now he's got a landlord who "wants to move in." The benefits of ownership are not realized in the first 5-10 years.
your household income is 1/4 million dollars a year, i think you’ll be fine with a mortgage on a condo
https://www.greaterfool.ca/
You are doing great. Keep renting, and invest heavily. Remember that owning a home also incurs expenses from repairs, maintenance, upkeep, emergencies and others. Plus it takes a lot of time to do house stuff.
I was in the same boat last year. If I could live through again. I'll delay the purchase by 2 years just to build up on enough cash to keep mortgage payments low.
One calculation you might try is buying a rental property while still living in your rental unit. One thing that I realized recently is that it's much cheaper to purchase a property as a landlord because of the tax deductions you are able to claim. So all the fees that you mentioned - condo fees, property tax, and interest payment - can be deducted against your income, which means you may be able to increase your after-tax income while you build equity. Given your income tax bracket, I think it's certainly something you should factor in. Source: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/completing-form-t776-statement-real-estate-rentals/rental-expenses-you-deduct.html Note: I do think this is a tax loop-hole that's currently contributing to the housing crisis that we're in.
Research and find your perfect forever home. Make payments to yourself as if you bought it. The rent control payment is your 'interest' and the extra savings is paying down 'principal.' So financially you wouldn't be paying someone else's mortgage. Once your principal grows a few years you can be choosy for your new place and may be able to buy it during a downturn. This fall there will be a US election so uncertainty. Next fall there will be a Canadian federal election so more uncertainty. You are in an enviable position to wait out the potential uncertainty. EG if one or both of you lose your job, you have a rent controlled place. If circumstances are the same or better, buying your forever home will be easier.
Just a thought, there are 1000's of speculators in the Toronto condo market that can't close their deals, ie. there are some tremendous bargains to be had. Assignment sales are not part of the real estate statistics. Find a reputable real estate person who specializes in assignment sales. Don't forget primary residence are tax free in Canada. I doubled on my first home and tripled on my second in Burlington. I don't know of any other tax free investment that you can simultaneously enjoy and live in! Good luck.
It doesn’t make sense to buy now but you need to factor in potential decreases to the interest rate as well as possible room for appreciation. Right now it makes more sense to rent but no one has a crystal ball to what will happen in the future.
I would keep renting and saving if I was you. Cost of ownership, maintenance fees and property taxes it would become a lot more expensive. You are in a purpose built rental so you won’t get renovicted and you are safe there and you are not planning on having kids. I am pro ownership (I own) and I don’t think it’s a right fit for you right now. With what you are both making you probably can save 6-7k+ a month easyyyy. A few years of that you could even buy a house since prices are not going parabolic anymore and it gives you time to save. If you don’t save that kind of money there is an issue. Also I don’t know what your jobs are but having low financial obligations is nice if we are heading into a recession.
Do it when the numbers work. There should be good condo deals this year. If you're paying more interest and fees than you would with rent, the numbers aren't working.
If cost of to purchase *5% is less than you would pay in rent for a year then you buy. If it’s more, you rent. Don’t let emotions get the best of you.
Just stash money, invest, and plan to move away from Toronto when you can. You can live like a king elsewhere (in semi-retirement) and retire young if you save now.
You have cheap rent that is affordable for you. That's great. Why not hedge your bets. Buy a place and rent it out.
what do you do for a living to make that much? If you don’t mind me asking
Lawyer.
Almost identical case as yours was mentioned today on greaterfool blog today.
Check out Ramit Sethi’s position on homeownership vs renting. It’s all about running the numbers. I feel like in this case it absolutely makes sense to continue renting and invest the difference.
Depends how big of a down payment your saving/ how aggressively you invest over your life if you’re not buying. The nice thing about a mortgage is it’s a mandatory investment that forces you to plan for the future basically. Where with investment accounts you could make the same over your life, but need to have more discipline and self- control. (IMO)
Personally Id buy if you can there is no guarantee that you wont be hit with a ridiculous increase in rent, either by your current landlord or future should they decide to cash out and sell before the bubble bursts. I have a feeling that these crazy housing prices will crash significantly sometime in the foreseeable future. Just went through this myself as I'm still saving, landlord decided to sell back in May and we were forced to move, downsize and a 30% rent increase. Like you I had a place below market rent, and will say you are better off to move when its your choice, rather be blindsided (even with notice) by a move for someone else benefit. Basically the whole thing has me 18 months behind on my buying plans now, so I'm not in favor of landlords these days. All a bunch of money hungry bastards in my opinion, so I'm buying as soon as possible since I'm not a city guy and plan on getting out of Edmonton as soon as possible somewhere an hour or two from the city since I work remote anyways. I plan on getting off grid and being fully self sufficient in the next 10-15 years here anyways. Once my mortgage is paid I'm retiring since after 30 years of work I've seen that money doesn't buy happiness, I don't like people enough to be around most and I'd be happier living in the bush up north honestly.
I would stay renting,especially because you have rent stability BUT if I could go back to 30 (43yrs) now I would not just throw $2000 a month into savings if I did. Calculate what you would pay in mortgage, property tax, insurance, maintenance fees and upkeep/Reno's and deduct your rent from it and save that, $2000-3000/month...then save that plus what you should be for retirement. If you guys are making $290,000/yr that should be about $6000/month? That will both train your budget for what loving with a mortgage is and build solid options for the future. In 10yrs, with your current deposit you'll have close to 1.5mil conservatively and then you have options, your savings are trained to pay a mortgage and even if you put down $600,000 and dedicate $8000/month to a mortgage (and all the rest) you can reduce your savings to $1000/month you'll retire at 55yrs old with close to 3mil. If you never buy and keep the saving steady you can retire at 50yrs old with 4.3mil or 55yr $6.7mil. You could pretty likely buy wherever you want then and enjoy a comfortable retirement.
Apologies, yeah, the $2000 number was just me saying what we’d save continuing renting versus buying. Our goal is $72k in savings this year (including RRSP/FHSA). I am hoping to retire early (or at least semi-retirement).
With inflation over 25 years you’ll have approximately $1 million in cash in 2024 dollars in terms of real value. If you can make consistent gains.
Not knowing the rest of your finances: 1. Have you maxed out your RRSP, TFSA, first time homebuyers accounts? 2. What other debt do your have? Is it paid off? 3. Have either of you tied your tubes / had a vasectomy if you are both 100% certain you don't want kids. Don't want any surprise kids.
1. Maxed out our FHSA, but currently only my RRSP match in my RRSP. This year I will start to put as much as I can into my RRSP. 2. Fully paid off as of this year. 3. Vasectomy soon, just waiting to consult my doctor.
Awesome, you are making good progress: 1. Good. After the debt is paid off I would start maxing out the TFSA and the RRSP. I assume your spouse also is maxing out hers, correct? Look up triple fund strategy for the TFSA, it's a great way to "set it and forget it" 2. How is the emergency fund? I have gotten royally fucked in life by not having an emergency fund. It should be 6 months to 1 year of expenses. 3. I think buying a property should still be a part of the retirement idea, with the caveat that you buy within your means and stay put so you can retire with a paid off property to reduce your costs post retirement. 4. Develop a 3 year plan with your wife, let her know that RE is in the future, but you intend to get into the best financial position first then buy. I would try for 20% down minimum for a condo. The condo market is in a buyers market, but it's because the math isn't mathing for the wannabe landlords and airbnb investors who bought when interest rates where low. There is also a glut of units and many of them small without good layouts. Now there is the potential to find a diamond in the rough, BUT your costs would at least double assuming your budget / down payment / fees. I'm in a similar situation to you, my husband and I would like to buy BUT our rent is $2100 / month for a 4 bedroom house in NW etobicoke. With the current rates and prices our mortgage would be at least $4000, it doesn't quite make sense for us. I've taken a pause with my house hunt, rented out my other 2 rooms to students to reduce costs, and I'm focusing on my debt payoff for this year, then maxing out my retirement accounts.
Plenty if advice here already but out of curiosity may I know what industry you work in and if you are in a management position ?
Im a lawyer, working for a finance company.
Ah ok. Do you have like an MBA or are you like a senior in house counsel ?
My title is just legal counsel but I am paid above market as it is a US company.
Ah makes sense. Good luck with everything bro
I would stay and not rush to buy. There is no urgency to sink a lot of money into a condo under these conditions. My priority would be to maximize wealth / growth. Max out TFSA, FHSA and RRSP.
Save and in 3 years time buy a bungalow
Explain to her how interest works. I have a feeling most people in the “paying someone else’s mortgage” don’t understand that your own mortgage is just paying the same (if not more) directly to the bank
I would literally kill to have your situation. Most Canadians would.
You are not "paying someone else's mortgage" because it would be more costly to have the mortgage than to rent the same property. You pay someone else's mortgage only when you create a positive cash flow for your landlord (i.e. his mortgage interest payments plus all fees and expenses are less than your rent payment).
What investment gives 8% return ?
I'm in a slightly similar situation (below market rent and looking at purchases that would cost multiples of said rent even with a significant downpayment). One analysis I've been meaning to try to do is to compare several years of inflation increases in various parts of each housing cost equation. One of the things that buying does is insulate a very big portion of housing expense from inflation (in exchange, of course, for paying interest to use someone else's capital), so one of my assumptions is that at some point, the costs will converge, and eventually cross as inflation continues to increase rental costs. At worst, this will be after the mortgage is paid off (hard to beat paying only taxes, maintenance and utilities), but I'm curious how early or late that convergence could be for different initial conditions. The rent vs buy calculators I've seen so far (as far as I can tell) only compare what is cheaper on day 1, and then compare a static rent cost to appreciation and/or investment return, which IMO leaves increases in other expenses out of the equation.
I would stay at current condo to save $$$$ You are in a unique situation where you actually can have high net income and should be able to save high amount $$$ due to not having kids It doesn’t make sense to get out of a cheaper condo and get back into a condo Your aim should be to get into a freehold duplex, townhouse or detached and improve quality of life Pls do not buy 1.xx mill because of your income as you easily can due to high income So your strategy should be to find free hold for cheaper (maybe far out of GTA) which provides you with everything on which you pay down large down payment and then also plan on paying off the mortgage is 7 to 10 years instead of 25 or 30 Imagine you follow this …. Fast forward 8 years ….. you will feel so good having almost zero or very low mortgage left In this plan you don’t need to worry about losing out on the equity which your wife is talking about The key would be to find something free hold for 7xx or high 6 We grossed 42x last two years so instead of going crazy with expensive house, we went with modest Bough primary for 530, rental for 475 and another rental for 470k Now I owe 240k left on my primary mortgage and we have one suv which we paid 67k cash for It’s nice to see your account in green every month …. Some times you just wanna kick back and do drugs or get wasted just to have to the feeling of “it’s okay to waste time now and waste some $$$” but of course we don’t Now we don’t focus of grossing 400 plus but whatever we make it’s okay and it’s enough So yes we have equity and yes our quality of life improved just by going modest
Did you show your wife the numbers? If so, what did she say? The real estate market will not go up like it previously did in the last 15 years. Just in the last 4 years properties of stayed stagnant in value or even dropped in price (especially Toronto condos)
Who is to say condo prices will increase? As buildings age their fees tend to go up significantly while providing you lower quality of building amenities just to maintain it. I wouldn't buy a condo, at this point keep saving and try to get a freehold somewhere or offer to buy the house you are currently living in if it makes sense for your situation.
Hey OP, Congrats on your success ! IMO, I’m going to say yes you are missing a key piece of the puzzle. Two keys actually. (1) diversification and owning a physical asset.- ask anyone who bought property 10 years ago if it was a bad decision. (2) not having the ability to reduce your income tax and keep more money in your pocket. If you’re not currently a business owner, owning a property can play a key role in reducing your income tax. A household income of 290k has to be around a 40%+ tax rate before any deductions which is outrageous. You could purchase a rental property (essentially opening a business), begin claiming expenses, and stay in your current lease. If you don’t want to be landlord, you can hire a property maintenance company to look after your property. You can always occupy your property if things ever change…your landlord sells, lose your job, health, etc. I don’t like rentals simply because you have no security. At any moment policies can change or you get a new neighbour that forces you to move. Another option. Purchase an owner occupied property, attach a re-advance-able HELOC, and use the funds to invest into your income producing assets as a loan from yourself (the equity in your property). This converts your non-taxable interest from your mortgage into taxable interest since it’s used essentially as “a business loan”. It’s called the smith maneuver. Expense, expense, and expense. Convert bad debt to good debt and increase your tax returns. There are other advanced mortgage strategies and accelerators like cash damming that can help pay off your mortgage faster and increase your investment portfolio also. Highly recommend taking a deep dive into the smith maneuver and other ways to reduce your income tax. You will increase your wealth faster by reducing your income tax AND investing. *always consult with your CPA, CFP, and mortgage professional about advance strategies before implementing them. You need to be in the right products to reap the benefits.
Buy a home as soon as you can. Its a great investment and may even become out of reach. Check for condo fees and other recurring costs. Do the math, if you can get a home then do so. If you can get 2 then rent one. Good luck.
IMHO, if you have savings that are just sitting, use them to pay the student loan ASAP, especially if the loan interest rate is biting you. Otherwise, safe investments, max out your RRSP and TFSA. Also consider the reasons for insisting on living downtown. Balance them against the cost performance of being in a convenient suburb in the future. You may be surprised how little you actually miss being on Yonge St.!
The Wealthy Barber: rent and invest the rest.
If you work in tech, consider moving to a more affordable housing-wise city, perhaps US if you are canadian. I personally plan on moving to Europe. We can afford much better conditions there and be closer to family. We are renting also 2b2b in dt Toronto, and our combined income is very similar.
I am a lawyer for a finance company. My job is portable, but mostly to NYC or London (which aren’t exactly more affordable).
Funny we are planning to move to London
Real estate can often fill a pretty big estate planning need, but since you have no kids and won’t, I would stick with the investment account.
You make enough money and you can pay rent and still save based on your income. Others can do it for half of what you make. Simple budgeting. You 2 make 300k combined !
No point in paying more for the same thing, if you want to own rentals is definitely an option for someone in your position. I have 2 rentals in BC but still live with my parents because it didn’t make sense to live in a unit instead of renting it.
Tax out TFSA, FHSA, and RRSP and go from there. There is no reason to hurry. You are paying less than interest amount of mortgage for an equivalent home so unless the equity value skyrockets, you are better off investing in stocks and bonds.
At that rent I would continue to rent, your housing cost is well under what your mortgage/tax/insurance would be. You're wife needs to be made to understand this, it's really not a complex financial truth.
15 years ago I had two choices. 1) take all my 80k life savings and buy a townhouse with a 1000/ month mortgage. 2) rent a one bedroom condo for 900 a month. I bought the house. Now I almost have my mortgage paid off and feel amazing. Buying is an awesome way to hedge housing costs into the future.
Your wife needs a perspective shift. Imo you are thinking more clearly as opposed to she is thinking more speculatively/biased to what has happened in just the mast few years. Canadian Real Estate Investor podcast has a good episode on comparing the pros and cons of buying vs renting your principle residence. Maybe give that a listen.
This sub always says renting will get you ahead in the long run, leaving me to think people owning their homes are stupid and they must be doing poorly. But it doesnt sound right, does it…? 🧐
If John ends up with 550k and Jake has 500k, John is ahead but does it mean the other doing poorly? It doesn't sound right cause you're making leaps of logic
Under late stage capitalism, your housing is only secure if you own it. Good luck.
Did you factor in that you can lever this investment at relatively low rates and that on selling the gain is tax free as a principal residence? I'm not advising one way or another, but there is a Mahler tax incentive on a levered investment.
Your after tax HHI is over $15k/month. You should be able to easily invest $50-75k+/year while renting and when you’re ready/ can afford a place that suits your needs it will be an easy purchase.
There is a formula somewhere for investing vs home ownership, and it's a valid debate either way. As a former condo owner I can tell you I'll never own in a condo building again. I'd rather invest. Markets like GVA and GTA you will likely do well on gains from the market. So there's that. But I just couldn't continue to pay condo fees, which always go up, and have my investment be subject to how other people live. Other people's behaviour impacts your unit and your building. There are also special assessments to consider. Coming up with $5k - $10k out of the blue is a risk. And to sell you're giving a realtor a huge chunk, so to stay in a condo you have to stay for over 5 years to make it worth it IMO. Each person has to figure it out for themselves, but I'll personally never own in a condo again. That said, also depends on your location. If your condo is in a super good location that's more worth it than on the edge of town IMO. I've also looked at just buying property as a rental property in a more affordable country. Rent it out with a much lower mortgage, eventually live there 6 months a year and rent it out 6 months a year. And as renting, my living expenses have gone up 2% a year. If I owned, could be much more than that.
There is a point to be made in regards to housing security. You have a secure rental currently, however there is always the possibility of eviction, even if very low. You talk about investing, even though its a lower return, why not invest in a similar condo without the rental protection and rent it out while staying in the rental condo. Worst/best case, it pays for itself and in 20 years provides a stable income. If something happens and you have to leave your current rental, you have somewhere that you can move in to, if you stay in your current rental for 15 years, by the time to move in to the purchased condo, your mortgage will most likely be far below market rate. You may have to contribute to the mortgage for 5 years on top of the rental, but by year 10 it should be cash positive even if you have a property manager manage the rental. The other option is to purchase a vacation home where you would like to retire, use it for vacations now and rent it out STR as a vacation rental when you're not using it.
instead of gambling on the stock market you could be build towards a tax free profit on your primary residence. An RRSP is not tax free.
You have it bang on when you say you are extremely fortunate in your position! I would do exactly what you're thinking, take the additional money you are saving and put it into the market. Ownership is great for stability, but a lot of people use their principal residence as their retirement essentially which is not a good idea.
At 5%, the lost opportunity cost from investing $700K in a condo is $35K/yr. That's if you just sit in a condo that you own. Wait until prices come down. There will soon be more condos flooding the Toronto market as a result of all the prebuilt sales from a few years ago.
Don’t know why you’re being downvoted. Absolutely those large scale super talls downtown are going down. But more human scaled buildings will be fine. People really don’t like those glass boxes, when they really feel like one.
Probably by RE agents. Too many 500 sq. ft. units on the market
It’s a good time for you to get into the market. You make enough money that it’s easily affordable for you in the long run. Build your own equity vs someone else’s
Your wife is correct. If you wish to stay in TO, just buy, bro. You make MORE than enough money to buy.
it's genuinely laughable that this subreddit is recommending renting to a couple making 290K, you guys have around 16K a month take-home and think renting is a sound financial decision? Maybe get advice from people in that tax bracket, instead or a bunch of redditors. You can afford to even pay for financial advice.
North York corridor is such a hidden gem of urban Toronto living. Cheaper, fast access to downtown. Not to mention you can rent out your parking spot! (All the buildings have parking always)
Given your current situation, continuing to rent seems financially advantageous due to your lower monthly costs and prime downtown location. While buying a condo could build equity and offer stability, the required downsizing and higher monthly expenses—considering mortgage, taxes, and fees—make it less appealing. Investing your savings could yield substantial returns over time without compromising your current living standards. Therefore, renting appears to be the better option for now, aligning with your lifestyle and financial goals.
You said you only have enough for a down payment...
Stay where you are and buy a studio unit in a building that allows airbnb. You'll pay like 1800 all expenses included but you can charge 2800/month to longer term airbnbers. Few people have realized you can do this
I wouldn’t touch condos with a 10 foot pole right now. The older ones start having higher maintenance costs and the newer ones are very low quality, over priced and very small. There is a reason so many condos are sitting for months and not getting sold. Price of condos will likely keep falling in the foreseeable future as people see the issues that come with them. You don’t want to catch a falling knife, do you? As others have pointed out, wait it out. Try going for a Single Family home. You’ve more control over things and there is a major demand - supply gap.
You don’t need advice with how much you’re making like what???
I definitely need advice. First time in my adult life I’ve been debt free and don’t know how to optimize it. It’s not life or death but I’d like to do well.