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The rental equation

August 6th, 2015 at 09:00 pm

Will we be saving money by moving? Can we compare apples to oranges? Have we saved? I think unequivocally yes. We just rented a single family house for $2400/month.

The house next to our rental sold on July 31st 2015 for $571k for a 4/2.5 bath in much nicer condition. Our rental was bought October 14, 2014 (less than a year for $445k). We bought our townhouse in 2005 for $575k so we are in the right price range without moving up cost. We also are moving up in size and amenities.

For people who are into real estate based on pure numbers not including maintenance costs over the years we averaged 2.8% appreciation over 10 years. I enjoyed not moving and having stability. But honestly we did better investing in the stock market.

Also for our rental I think our utility bills will be lower I suspect because the house is 2005 built versus 1880s. We were averaging $250/month balanced bill for heat/natural gas and $250/month electric all year. Our heating bills if we had not paid balanced billing was on the worst months $700-800/month. We also paid approximately $150/month per unit in our association for water and sewer. According to the property manager we should pay around $100/month water, $100/month electric/heat, and $30/trash.

Of course we won't have a tax break, nor will we be "saving" money by paying down equity. So that may negate the savings in utilities.

But I think since we've moved to a new area and are uncertain about it renting makes sense financially so we don't leap into a house and make a mistake. What if we don't like the commute? What if we don't like the schools or community? Yes renting is paying someone else's mortgage but you are also buying yourself the flexibility to research the real estate market. You are buying the flexibility to make a mistake on location without losing your shirt and moving.

So yes with two kids and in our 30s we are renting. A lot of our friends and colleagues have said why? Don't waste money. You are going to hate it. But honestly it makes sense.

Renting is a luxury because often times it's cheaper to buy. But renting buys you flexibility. You are buying opportunity (job, school, life changes). And truthfully you are buying not having the headache of repairing anything. I am honestly a little apprehensive at living in someone else's home. But then I think "oh well if anything breaks, it's THEIR problem". And if anything happens they fix it. I can't wait. I've done enough home repair in 3 months to last 3 years.

3 Responses to “The rental equation”

  1. BudgetBrilliance Says:

    A good post LivingAlmostLarge. It raises a lot of questions that really can only be answered by personal preference and circumstance. We have always been home owners but I love the idea of renting. There's always that feeling of excitement and change. You don't waste weekends doing fix ups.
    We have a rental and $140k in a managed fund.
    This weekend I've got to go to the rental to hang new blinds and meet the plumber to fix the taps that were wrench off. The doors had holes punched in and we needed to repaint the place. We had a hearing at a claims tribunal this week. The property needs 2.2% growth to break even.
    The fund on the other hand has in 3 months repaid any entrance fees, management fees and has added $11,000 onto our investment.
    My conclusion- It is much easier and less headache to be invested in a fund.
    I wish you all the best in your future endeavours. It sounds like you have a lot of exciting changes on the horizon.

  2. creditcardfree Says:

    I'll need to post about our rental more in the next year or so. So far it's great. We are in what I would consider an upgraded home. We certainly wouldn't have bought in this price range, however we are willing to pay a little more to get our daughter into a high school with an engineering program and with landlords we know. There is no property manager, so it is just an agreement between two parties.

  3. livingalmostlarge Says:

    Budget interesting perspective on a rental and investment. CCF what do you mean that you wouldn't have bought in this price range? What is the cost of the house you would have to buy where you rented? How much is rent comparatively?

    I think the house is very reasonable to costs for us. We could definitely afford the neighborhood easily. I'd get the 4 bd house I'd wanted for a very competitive price. But at the same time I'm not sure about how small the lots are and commute.

    But can't beat not doing ANY more home repairs and I know you understand that!!!

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