Over our lifetimes we’ll likely run into the dilemma of buying vs. renting. So, how do we know when one is better than the other? Everyone’s circumstances, lifestyle and dreams for the future differ and this can change over time. Like any worthwhile investment strategy, it’s a good idea to determine what your long-term plan will be in terms of your potential income and how long you intend staying in a particular location.

You might look at it from the point of view of “age and stage”. Assuming we live a good long life, if you’re young and just starting to make your way – buying is always a worthwhile decision but in hot markets it’s how you get there that matters. Having said that, even if you’re in your middle years and actively working – buying is likely still a good investment to leverage for those later years given the soaring and unpredictable rents in some major cities.

An investment today in real estate could pay big dividends in the future as witnessed not only by the Vancouver and Toronto markets but others as well. But getting into the market can be tricky. Not only is it wise to have a decent down payment you’ll have to factor in such additional costs as lawyers fees, home inspections, land transfer taxes, annual property taxes, capital replacement, regular repairs and unexpected repairs – like sewer lines and lifestyle expenses. While renters don’t need to factor in some of these expenses, in Ontario unless you’re in a rental unit that’s covered by rent control (built prior to 1991) you could see your rent double or triple in a very short period of time – dramatically affecting your ability to make financial investments for the future, leaving you vulnerable.

Younger generations looking to get into a hot market move back home or share a rental unit to save for homeownership. Another option no matter what age or stage in life is to buy with a friend or family member and look for properties with rental income to help both parties pay mortgage and living expenses. While this might not be ideal initially and comes with its own set of challenges, over time this approach can certainly help to leverage options for future independent real estate investments. And yet another option is to buy a property and rent it out. This latter idea comes with a whole range of considerations, like higher insurance, income tax issues making it essential to set rents to cover the mortgage and other costs so you’re ahead of the game. In worst-case scenarios you might get wayward or destructive tenants, so proper screening is critical if you decide to become a landlord.

Investing in real estate provides for forced savings over time and helps build that nest egg for retirement years – opening up options. Let’s face it, good financial planning involves diversified investment that includes financial instruments as well as real estate. But life can be lumpy and our plans change. Bottom line – it’s up to you to do the math based on where you think you want to be in the future. And don’t forget to plan for the unexpected – to the degree possible – and enjoy the ride!

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