Deciding whether or not it’s the right time to buy your first home is one of the most important decisions many people will make in their lives. The early decisions we make about how and where we want to live can have a material impact on our future.
Despite what most traditional real estate agents tell you, it’s not always a great time to buy real estate. Even when the market is strong with no downturn in sight, there are still cases where it may not be a great time for you to buy your first house.
With that said, I find that the majority of rent vs buy articles in the mainstream media tend to have a strong rental bias, likely because it’s a contrarian position in today’s market. While I do believe that rental biased articles add value to the debate for today’s home buyer, I do have concerns about the analysis in many of these articles. Most are filled with incorrect assumptions and misleading analysis aimed to further the analyst’s renting bias.
Below I highlight just a few of the biggest and most common mistakes I’ve seen in rent vs buy articles. Keep these in mind when doing your own analysis.
Apples to Oranges
A key part of any rent vs buy analysis is ensuring that the rent we are using reflects the estimated rent for the same kind of property we are considering purchasing. If you are currently renting a one bedroom apartment in Mimico for $1,000 per month, you cannot compare your current rent to buying a one bedroom condo in Liberty Village. Aside from the fact that the locations are completely different, the types of housing are different. Apartments in purpose built apartment buildings usually rent for significantly less than condos because they are typically in poorer condition and because they don’t have the same amenities.