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Breaking down my cost of renting vs. owning

Over the last few days I started calculating how much it would cost me to sell my home in the suburbs and move downtown. After a feeble attempt at finding a condo in Vancouver within my price range (that wasn’t a complete dump), I’ve come to the (obvious) realization that I’ll be a renter once I move. And I’m okay with that, because there are actually a lot of options for me to choose from.

So in order to see how much I would save by moving downtown, I decided to take a typical monthly budget with my mortgage and compare it to what I would be paying if I were renting instead:

mortgage_vs_rent

Note: Rent in the area I want can vary in price from $750/month micro-lofts to $6000/month luxury oceanfront condos. While I actually do find the idea of living in a micro-loft appealing, for the purposes of this exercise, I went with $1,200/month rent – which is slightly lower than the average of around $1,400 that I was finding.

So based on the numbers above, I’d be saving $400 month. Huge money to me. Not only that, but I’d be cutting down on my commute (most places I looked at I could walk to work), and I’d be within walking distance to a lot of the things that I love to do in this city.

There are drawbacks though. First of all, according to my mortgage terms, I’d have to pay approximately $1,900 to back out of my mortgage. Not as much as I thought I’d have to pay, but still a significant amount. And for field hockey and visiting my friends, I’d have a longer commute from downtown because obviously I’d be farther away. But I know I’d be happier moving, so I think the positives outweigh the negatives.

$400 extra in my budget means that I could bring my retirement contributions up towards the $1,200-$1,300/month range with no real effort, and I find that extremely appealing. It then becomes feasible to start looking at potentially being able to put away closer to 50% of my income from my full-time job towards retirement, but one step at a time I suppose. :)

My biggest home buying regret: not fully considering the future

I’ve made a lot of financial mistakes over the years (which is kinda why this blog exists in the first place), but I never thought I’d consider anything related to buying my first home to be a mistake.

Let me backtrack a little bit.

Just over four years ago, I found myself single, with a good job (plus lots of freelance work), and a $50,000 down payment. I had always imagined buying my first home with a partner, but when I was ready to buy and found no man by my side, I thought: why should that stop me? I worked so hard the previous 6 years to get out of $20,000 worth of debt, save up a $10,000 Emergency Fund, as well as a large enough down payment, I knew I could do it on my own. So that’s what I did. :)

I found myself a Realtor and went house hunting. Within a few weeks, I found exactly what I was looking for: a cute 1-bedroom townhouse in a great neighbourhood. After a few rounds of negotiation, we settled on a price which was well under the mortgage amount I was approved for (and the budget I had set for myself), even before my down payment.

Things moved quickly, and soon I was in my new home. I was making extra payments towards the mortgage, saving money, and having fun exploring my new neighbourhood with my new friends. My office moved to a new location, and all of a sudden, my commute to work was 15 minutes. Life was good.

Little did I know that by the end of that year (8 months after moving in), I’d be quitting my job and moving to Europe.

Moving to Europe was one of the best experiences of my life. I learned how to hustle as a full-time freelancer, and I got to explore so many different countries. However, it wasn’t good on my finances, as I had to continue paying my mortgage while I was away, and had to significantly scale back on my retirement contributions.

Now that I’ve had my home for 4+ years, I’m finally starting to think about selling it. My home, as lovely as it is, just doesn’t fit my lifestyle anymore. My plan had always been to re-evaluate my living situation after my 5-year mortgage is up, but now that I’m almost there, I find myself wondering if it was all worth it.

I spoke with my Realtor just a few weeks ago, and based on recent sales history in my area, he thinks I’ll be able to sell for more than what I paid for it. After running my own numbers, I’ll likely come out ahead over renting during the same period of time. So, that makes me happy. But I wish I had considered whether my life was really settled by the time I was ready to buy. I thought it was, but clearly it wasn’t.

That being said, I really do love my home, and I’ve had a lot of great home ownership experiences so far:

  • I borrowed a manageable amount of money for my mortgage
  • I kept early retirement goals in check
  • I kept savings in the bank
  • I’ve met a lot of really great people in my neighbourhood
  • I learned how to deal with a strata council (pros and cons)
  • I learned how to be happy living on my own
  • I went through a successful renovation project

Thankfully this “mistake” (likely) will end up as a positive outcome for me financially, but it certainly has made me re-evaluate where I want to live going forward, and that as a single female living in an insanely expensive city like Vancouver, renting is probably what’s in my future.

Would you buy a pre-construction condo?

FrameworkOver the weekend, BF and I got to discussing real estate, and what would happen if, in the future, we both sold our current properties and bought something together. I live in the suburbs and BF lives right downtown, and we both agreed that we would be happier living close to downtown in our preferred neighbourhoods of Gastown or Chinatown.

For those who don’t know Vancouver, Gastown is a beautiful, established neighbourhood in the downtown area. It has historic brick buildings, cobblestone sidewalks, and lots of shops and restaurants. Just around the corner is Chinatown. It’s raw and gritty, but you can see how things are changing (businesses are moving in and condos are going up), and in 15-20 years I think it’ll just become a seamless an extension of Gastown.

Because we want to maintain our current lifestyle, obviously a house is out of the question. :) So we went online and started looking at condos within a $400-500k price range and reasonable monthly maintenance fees. There were a lot of options to choose from. But the ones I liked the best were the new construction homes. I liked the idea of being able to customize your space, and in the neighbourhood we really liked (Chinatown) there really aren’t any existing buildings to choose from. We even walked over to the showroom of our favoured condo development that we saw online – Framework – and took a look at the plans and the building model. Everything in the show home was so beautifully decorated and modern, I can see how people can get swayed by new builds. :)

Of course there are cons of buying into a condo development that hasn’t even been built yet. You have to pay tax on all new properties in BC, you have to wait and be patient for them to finish building (and there are always delays), and while you wait, the value of the property could go down. Not to mention, you won’t really get a good sense of what the building (and your unit) will feel like until you walk into it for the very first time.

After looking at the Framework development, we strolled through the neighbourhood, and I realized that it’s where I want to move next. Whether it’s renting an apartment there, or buying a condo there for next year, I’d really like Chinatown to be my next neighbourhood. Whenever that might be. :)

Have you ever considered buying a pre-construction condo? 
Have you ever decided to buy/live in an up-and-coming neighbourhood?

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