{"id":1070,"date":"2011-12-19T13:17:20","date_gmt":"2011-12-19T18:17:20","guid":{"rendered":"http:\/\/www.holypotato.net\/?p=1070"},"modified":"2011-12-19T14:42:33","modified_gmt":"2011-12-19T19:42:33","slug":"renting-explaining-it-again-for-you","status":"publish","type":"post","link":"https:\/\/www.holypotato.net\/?p=1070","title":{"rendered":"Renting: Explaining it Again For You"},"content":{"rendered":"

MOA: “I can’t see renting being better than owning long-term. I really can’t.”<\/p><\/blockquote>\n

I can understand that there is a lot of room for debate as to when exactly it’s better to rent than buy: there are a lot of factors to consider, and a lot of forecasting future rates or guesstimating costs. But it’s quite another when people don’t seem to understand that there is some point<\/em> where that happens, as with MOA’s comment above. To try to explain it again I will say first remember that price matters<\/b>. <\/p>\n

If someone is willing to rent you a house for $1\/mo, and that house costs $1,000,000 to buy, then it is overwhelmingly better to take the rental option: you can invest your million bucks in a savings account and make more than that in interest, and if you don’t have a million bucks, then even better: you don’t have to convince a bank to lend that to you, and incur the even higher interest costs. Conversely, if rent was $1000\/mo, and the house was $36,000 to buy, then it would make sense to buy the house instead: you’d have it paid off in just a few years.<\/p>\n

So the important concept is that there is going to be some<\/i> cross-over point between those two extremes where rents and prices are such that it’s a break-even proposition for either choice. And beyond that point, there will be a set of prices so high and rents so low where it just doesn’t make sense to buy any more, long-term or not. Exactly where that cross-over point is depends on a lot of factors, like interest rates, how long you’ll stay, taxes, appreciation, maintenance, insurance, risk tolerance, etc., but there is <\/em>that break-even point (and a regime where renting is better) somewhere<\/em>.<\/p>\n

For most of our history, we haven’t been on the other side of that line, so it seems hard to imagine: all our heuristics are geared towards a life where landlords make money and buying a house is a smart financial move. So yes, in most markets most of the time<\/em> it’s better to be an owner if you’re in it for the long-term. But in Vancouver and Toronto, it’s not most of the time: we’ve crossed the line.<\/p>\n

It’s tough to get people to grasp that concept sometimes when it’s just not in their everyday experience, even if it is at its core a simple concept. It’s like saying to people that somewhere above our heads, there’s no air to breathe. “That’s nuts,” they say “I can dig a hole and there’s air below here to breathe, and I can go up an elevator to the top of a building and there’s air to breathe. Now excuse me while I climb into my open-air rocket-ship.”<\/p>\n","protected":false},"excerpt":{"rendered":"

MOA: “I can’t see renting being better than owning long-term. I really can’t.” I can understand that there is a lot of room for debate as to when exactly it’s better to rent than buy: there are a lot of factors to consider, and a lot of forecasting future rates or guesstimating costs. But it’s […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,20],"tags":[],"_links":{"self":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/1070"}],"collection":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1070"}],"version-history":[{"count":0,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=\/wp\/v2\/posts\/1070\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1070"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1070"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.holypotato.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1070"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}