Buy vs rent during residency

[F508]

What were factors you took into consideration for buying vs renting during residency?

[psychiatry2017]

I think that renting would be a better idea, because you might end up not working in your city of residency, and paying mortgage + property taxes on your salary of R1 is not very feasible, you could always use your LOC and get your 20% down-payment waived by banks, but realistically, selling a house is a  lot of work, just my two cents.

Unless you are pretty sure that you will end up working in your city of residency, say you are in family medicine and psychiatry, and want to live in a house with your family, by all means, go for it!

[frozenarbitor]

https://www.whitecoatinvestor.com/10-reasons-why-residents-shouldnt-buy-a-house/

good article on why you should rent instead of buy in residency

[rmorelan]

Most of the time I don't think it makes much sense, the math usually says 5 years in a place is the average point to breaking even (real estate markets may vary of course). Even if equal you still lose out on flexibility. I think the white coat investor above outlines much of this ha - not a bad site, although of course with a US take on things. 

 

[NLengr]

We bought. We worked out the costs for the house we needed (3 year old small townhouse in the burbs) vs. renting over 5 years. For us, it worked out to basically the same price (mind you, we had part of the downpayment "gifted" to us by family). Renting had less costs at the end (didn't have to sell the house) but was more per month. 

The biggest thing for us was we wanted a house with a yard because we knew we were planning on having kids soon after residency started. We also did not want to have to move during residency because thelandlord of the place we rented decided to sell the property (my wife rented a lot as a child and that happened a few times).

It really depends what your priorities are in residency. 

[dancemom]

It depends, and you need to run the numbers. Assuming there are no significant changes to the market, estimate you can sell for the same price as you buy. Assuming a house that costs 350K vs a rental costing 2K/month.

Realtor costs vary, from 2% of the sale price to 7% for 100K + 1% above, so 7-15K. Maintenance costs will vary, assume 1-3% annually, depending on the age and state of the home. 3.5K -11K annually. Mortgage payments would be around1800 / month. 

Over 2 years: Total rental costs: 48K, Total ownership Costs: 7K realtor + 7K maintenance + 43K payment - 18K equity = 39K expenses. A difference of 6K,  250 a month. Not a big difference, many limitations on both ends. If prices change, rent may increase or decrease. Mortgages are locked in. If your water heater or furnace breaks, owners are on the hook. 

Over 5 years: Rental costs: 120K, Ownership costs: 7K realtor+  18K maintenance + 108K payments - 57K equity = 76K expenses. A difference of 44K, 733$ a month. Again, the value depends on many other priorities as well. 

[indefatigable]

1 hour ago, dancemom said:

It depends, and you need to run the numbers. Assuming there are no significant changes to the market, estimate you can sell for the same price as you buy. Assuming a house that costs 350K vs a rental costing 2K/month.

Realtor costs vary, from 2% of the sale price to 7% for 100K + 1% above, so 7-15K. Maintenance costs will vary, assume 1-3% annually, depending on the age and state of the home. 3.5K -11K annually. Mortgage payments would be around1800 / month. 

Over 2 years: Total rental costs: 48K, Total ownership Costs: 7K realtor + 7K maintenance + 43K payment - 18K equity = 39K expenses. A difference of 6K,  250 a month. Not a big difference, many limitations on both ends. If prices change, rent may increase or decrease. Mortgages are locked in. If your water heater or furnace breaks, owners are on the hook. 

Over 5 years: Rental costs: 120K, Ownership costs: 7K realtor+  18K maintenance + 108K payments - 57K equity = 76K expenses. A difference of 44K, 733$ a month. Again, the value depends on many other priorities as well. 

Wouldn't those numbers depend on a good downpayment and of course maintained very low interest rates?  I mean 57K equity after 5 years seems like it would have to be a shorter term with a smaller mortgage, not maybe the full 350K.  Also, I think since NAFTA was renegotiated, it seems the BoC is very likely to raise interest rates, so it will be harder to pay off principal with higher rates.  

[dancemom]

I used Canada Trust's online calculator with a 25 year amortization and 3 year variable rate mortgage for 350K, outside of the down payment. Low down payment mortgages would need CMCH, adding to the amount mortgaged. You are out of pocket more with a purchase, but you do gain equity. 

[indefatigable]

21 minutes ago, dancemom said:

I used Canada Trust's online calculator with a 25 year amortization and 3 year variable rate mortgage for 350K, outside of the down payment. Low down payment mortgages would need CMCH, adding to the amount mortgaged. You are out of pocket more with a purchase, but you do gain equity. 

Ok - just did that.  I get 47K equity, which is still a lot after 5 years, but I wonder in 3 years whether as low interest rates will be available, given all the BoC signalling.  It's predicted there will be two to three hikes over the next year or so.