Insider Advice

Just starting out?

RENtiNg is youR best choice

JANE HERMAN

If you’re a young single, a fresh-at-work professional, or a recently married couple and you’re wondering what to do about housing, there are many good reasons why you should choose to rent instead of buying your first residence.

At this stage of your life, you may be finishing up your education, paying off student loans, or just beginning your first job(s). It’s not likely that you will have even accumulated enough cash to use as a down payment.

One of the many advantages renting has over home ownership is that there is no large down payment to be paid up front. You only have to come up with your first and last month’s rent.

And despite people who try to convince you that you can own a condominium or home for the same price as renting, here’s the truth: Renting is always substantially less than owning. While it is possible that monthly mortgage payments might be comparable to what you’d pay to rent, as an owner, you will also have to pay property taxes, all maintenance expenses (either monthly maintenance payments in a condo, or all costs of repairs and maintenance in a house). Many apartments include utilities or hydro in the rent, and when owning, you would also have to pay an additional amount for these services. What about insurance? Tenants’ insurance is always less expensive than the cost of insuring your own home.

At this stage of your life, flexibility is important because you are very likely to move again within the next three to five years, either to take another job, go back to school, or because your family is growing and your needs are changing. It’s much easier to make a move when your only obligation is a one-year lease.

Some people will also try to convince you that with renting, you’re not building equity. But when you factor in all the hidden costs of buying and selling real estate, from commissions, to legal fees to land transfer taxes, etc., the reality is that no condo or house is going to appreciate that much in the short term to offset those hidden costs. If you are lucky enough to actually have enough cash accumulated to use as a down payment on a house, keep it in a secure two- or three-year term investment with a good return. When you run the numbers, you will be much further ahead three years down the road than if you had invested it in a condo.

The other good reason for renting at this stage of your life is that renting can offer all of the benefits of living in a prime neighbourhood – one that you likely couldn’t afford to buy in – such as convenience to transportation, shopping, recreation facilities, etc., along with condo-quality amenities at a price that won’t leave you cashstrapped. With renting, you’ll be able to save a little every month for emergencies, travel, retirement, or have a little more disposable income for furniture, a car, clothing and entertainment, which is also important to you.

When you consider all the advantages that renting affords, you’ll see that your dream home is really an apartment!

Jane Herman is a communications consultant who has worked in the rental property industry.

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