Sometimes, even the experts get it wrong, or maybe not entirely right. In her new book, Money Rules, financial guru Gail Vaz Oxlade says that buying a home is not for everyone. Her No. 1 rule: Renting is not a waste of money.
“Home ownership can be
a big ol’ pain in the arse,” she writes. “There are moments of joy and
pride that come with home ownership, but it’s not for everyone.” So far
so good.
Vaz Oxlade then sets out a list of people who should not own a home. In her world view, they are those people who:
Over the years, I have
represented many thousands of home purchasers and can honestly say that
the vast majority have successfully violated one or more of Vaz
Oxlade’s rules, and some have even violated most of them.
For most of these purchasers, homeownership has been a rewarding experience.
Let’s look at the
numbers. Based on Toronto Real Estate Board statistics, average
Toronto-area home prices rose every year from 1967 ($24,078) to 1989
($273,698), again in 1994, and from 1996 to 2012.
There was a market slump in the early 1990s, but from 1997 to 2012, prices have gone up every year. Typical prices:
Clearly, then, those
people who sat it out and waited until they could meet Vaz Oxlade’s
criteria have suffered financially. My own No. 1 rule is: Don’t wait,
and don’t follow Vaz Oxlade’s rules.
I have many clients
who have made more money from real estate in any given year than from
their salaries, despite having failed to meet Vaz Oxlade’s criteria.
In an interview last month on the CBC radio program Ontario Today,
Vaz Oxlade told host Kathleen Petty, “We have bought the belief that if
you aren’t working towards owning your own home you are an
underachieving slug.” (So much for empathy.)
What she misses,
according to Toronto realtor Barry Lebow, is that there are two types of
tenants: tenants by choice and tenants by circumstance. Lebow says that
most of Vaz Oxlade’s concepts work best for tenants by choice.
Some renters easily
qualify for homeownership under Vaz Oxlade’s criteria, but choose to be
tenants for many reasons. They may, for example, not want to deal with
condo board politics, and would prefer to deal with a single property
manager or landlord. Others could pay cash for their homes, but just
don’t to be tied down, or have other uses for the funds.
The bottom line is that the decision to buy or rent is a very personal one, and for many it has nothing to do with money.
For those who have
either dipped their toes into the real estate market, or plunged in over
their heads, real estate offers attractive features not found
elsewhere, including:
loses, say, 10 per cent of the value of a home, will still recover the
remainder. A tenant gets back nothing.
For most people, home
ownership is about more than dollars and budgets and leaky faucets.
Lebow hit the nail on the head when he told me, “Homeownership is about
the enjoyment of one’s life, of raising a family and having something
that speaks to the world: This is mine!”
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron
in Toronto and a past board member of the Tarion Warranty Corp. Bob
specializes in the areas of real estate, corporate and
commercial law, estates and wills and landlord/tenant law. His Title Page column appears alternate Fridays in The Toronto Star and alternate weeks on Move Smartly. E-mail bob@aaron.ca
February 15, 2013
Buying |