Maintenant en lecture: HOUSING: BEING AN OWNER OR TENANT
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HOUSING: BEING AN OWNER OR TENANT

HOUSING: BEING AN OWNER OR TENANT

In 2016 I wrote a book and one of the chapters that generated the most interest was the chapter on buying a house or living in rent

In summary, I said this:

Buy a house or rent an apartment

Home ownership is an important goal for many people, but the costs associated with purchasing a home must be considered. For example, interest, taxes and maintenance costs can be considerable and affect finances in the long term. Additionally, with today's low interest rates, investing in the stock market can offer a higher return than buying a home.

It's worth noting that the costs associated with real estate ownership can be considerable, with taxes, higher utility bills, and maintenance and renovation costs to consider. It is therefore important to weigh the pros and cons of real estate ownership and stock market investing before making a decision.

Is this still valid in 2023.

Yes, this statement is still valid in 2023. Here are the results of my research based on data from the Canada Mortgage and Housing Corporation (CMHC)

Price of a house and rents

here is a table showing the evolution of house prices and rents for the period from 2012 to 2022 in Quebec.

Year

Average house price ($)

Average rent for a 5 1/2 ($)

2012

234,000

835

2013

243,000

855

2014

249,000

872

2015

254,000

892

2016

262,000

918

2017

273,000

951

2018

295,000

1,034

2019

316,000

1,105

2020

339,000

1,186

2021

376,000

1,318

2022

400,000

1,400

These figures are based on data from the Canada Mortgage and Housing Corporation (CMHC) for the Quebec market. Please note that these prices are averages and may vary by region and other factors.

S&P 500 performance since 2009

The S&P 500 has returned over 550% after inflation since 2009 (see link here: https://bit.ly/3JrAjVF

Downpayment

According to data from the Canada Mortgage and Housing Corporation, in 2012, the average down payment for a first property in Quebec was approximately 20% of the purchase price. So for a purchase of $234,000, this would correspond to an average down payment of approximately $46,800 .

Okay, here is the table you requested:

Year

Initial balance

Annual payment

Interests

Capital

Residual balance

2012

187,200

-

-

-

187,200

2013

183,224

10,833

6,896

3,937

183,262

2014

178,877

10,833

6,761

4,072

178,805

2015

174,133

10,833

6,624

4,209

174,015

2016

168,965

10,833

6,486

4,347

168,618

2017

163,342

10,833

6,346

4,487

162,855

2018

157,233

10,833

6,206

4,627

156,606

2019

150,602

10,833

6,063

4,769

149,832

2020

143,414

10,833

5,920

4,913

142,501

2021

135,635

10,833

5,775

5,058

134,577

2022

127,227

10,833

5,629

5,204

126,023

In this last table, I assumed that the down payment is 20% of the purchase price of the house, or $ 46,800 . The interest rate is the one we used previously, 3% ( Bank of Canada ). Annual payments are calculated for a 25-year mortgage, and the remaining balance is the amount owed after each year of payments.

According to the Association of Construction and Housing Professionals of Quebec (APCHQ ) and the CMHC, the average charge rate for the maintenance and maintenance of a house is between 1 and 4% of the value of the property. House. I used 3 for the exercise

which now gives the following table:

Year

Average cost for a house

Initial balance

Annual payment

Interests

Capital

Residual balance

Total charges = interest + 3%

Average rent

Annual rent

rent vs house difference

2012

234000

187200

-

-

-

187200

2013

243000

183224

10833

6896

3937

183262

14186

855

10260

3926

2014

249000

178877

10833

6761

4072

178805

14231

872

10464

3767

2015

254000

174133

10833

6624

4209

174015

14244

892

10704

3540

2016

262000

168965

10833

6486

4347

168618

14346

918

11016

3330

2017

273000

163342

10833

6346

4487

162855

14536

951

11412

3124

2018

295000

157233

10833

6206

4627

156606

15056

1034

12408

2648

2019

316000

150602

10833

6063

4769

149832

15543

1105

13260

2283

2020

339000

143414

10833

5920

4913

142501

16090

1186

14232

1858

2021

376000

135635

10833

5775

5058

134577

17055

1318

15816

1239

2022

400000

127227

10833

5629

5204

126023

17629

1400

16800

829

152916

126372

By analyzing the returns of the BMO ZSP fund and injecting an average of $400 per month (the residual between the rent and the maintenance of the house) we obtain the result an amount of 237,000 on our $46,800 invested

If we take for granted that our house is now worth 400,000 and that we paid 152,000 and that we have a residual value of 126,000 , we therefore obtain a net worth of 122,000 for the purchase of a house

With the investment in a fund based on the S&P 500, we therefore have a net worth of $ 237,000. Since the TFSA began in 2009, good tax planning would ensure that our returns would be mostly tax-sheltered.

So what is the best investment if you can be disciplined?

The rent with the forced placement would therefore have enriched us by 117,000 more than if we had bought a house

Interested in our books?

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8 comments

Si j’avais à recommencer, je garderais un appartement. Par contre, vu que je voulais profiter d’espace et d’un terrain pour mes chats et mon chien, j’ai donc eu l’idée de rendre ma maison payante, c’est elle qui me paierait pour y vivre! Depuis 2013, j’ai acheté ma première maison et m’accrédité famille d’accueil en déficience intellectuelle! Depuis ce temps, je suis en mesure de mettre assez d’argent de côté, avoir un CELI car les REER ne servent à rien dans ma situation (tout un monde à découvrir)! J’aime ma situation, rien n’est jamais parfait peu importe l’emploi que l’on occupe. Moi, c’est un choix et j’en suis très fière. Si ma maison ne me payait pas, je serais en appartement. Ton tableau est très clair et explique bien les chiffres…Merci!

Martine Laberge

Merci Frank toujours excellent!

Mathieu

D’accord sur toute la ligne du côté financier. Pour ce qui est de la qualité de vie ( piscine, animaux de compagnie etc.) je ne suis pas certain que ces sacrifices valent le rendement financier. Mon humble opinion.

Gyslain Boudreault

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