Should I Rent or Own a Condo?

THERE ARE 3 AREAS TO CONSIDER WHEN DECIDING ABOUT RENTING OR OWNING REAL ESTATE.

1. The Principle Of Owning Real Estate

It is important to own a piece of real estate if you want to build equity. You don’t want to give that equity to a landlord. Your mortgage payment goes towards paying your principal and interest. At the moment with low interest rates, a large percentage of each mortgage payment goes to the principal, paying down your mortgage, and building equity in your property. This is what we call forced savings.

2. Investing In Real Estate Or The Stock Market

For some people, they feel their invested income is in a better place in the stock market. In real estate, your gain (or loss) in your principal residence is tax-free. This is not the same as other investment income as those gains are taxable. The stock market and real estate both increase in value if you hold them over time (a series of years). In real estate, you own land which historically has been a safe and solid investment. A real estate asset can offer some control and a tax benefit.

3. Securing A Down Payment

The most difficult part of buying a condo for some people is the down payment. You have to find creative ways to save a down payment so you start to build personal equity. Some solutions are to have weekly or monthly savings goals, spend less on disposable income, or share an investment with a friend for a period of time. Over time many immigrants chose to live together in one property to save money for a down payment. Then each family member helped the other to achieve their goal of homeownership. TFSA and RESP are great government products that can be used as a vehicle to save and grow your downpayment.