Renting Vs Owning

Renting Vs Owning

One of the main reasons people rent in The Lower Mainland is affordability. Making rent each month can be a struggle for a lot of families and buying a home or condo in The Lower Mainland may require a sizeable down payment, plus, the monthly payments on a mortgage are typically a little higher than rent.
Second big reason: housing affordability; real estate isn’t cheap! In fact, most would-be home buyers in The Lower Mainland continue to rent with little hope that prices will become more affordable or that they will be in a better financial position to buy a Lower Mainland home at a later date.

Rent every month is money out the door – the renter receives a home, life goes on, the months add up turning into years, and when it’s time to leave the home, the renter walks away from the property – empty handed. There is a better way!

THREE REVENUE OPPORTUNITIES
1. A home owner may rent their property.
Rental income is a revenue stream.

2. Property debts, mortgages etc. decrease with regular, on-time payments.
Equity is a hidden revenue stream.

3. In the long run, property appreciation (ie increase in value).
Value above the purchase price is a future revenue stream.

If you live in the property, you only cancel one revenue stream – you can still benefit from the equity revenue stream and the property’s increasing market value.

Example: You buy a $500,000 condo, and live in it for 5 years.
RENT REVENUE = $0.00 (You own the condo and live in it, no tenants)

EQUITY REVENUE = $138,000
If the property appreciates 5% per year for five years, it’s new value is $638,000

APPRECIATION REVENUE = $57,000
If you had a full mortgage paying 5% interest, the equity in five years is $57,000

TOTAL REVENUE = $138,000 + $57,000 = $195,000 in 5 years (tax free if principle residence declared)

* 5 Years of RENT = negative $120,000
Rent revenue is negative $2,000(rent) x 12mo x 5yrs = -$120,000 (negative)
Equity revenue is zero. Appreciation revenue is zero.


Small Steps, Equal Opportunity
To increase your net worth, the equation may require you to buy a less expensive property in an area you might not live in. Over time, the equity revenue stream, the increased market value, and if you can rent the property out – these three revenue streams will put money into your doors and increase your net worth. Next property, bigger numbers; and on and on and on. It’s a simple formula, and have many people saying, “my house made more money than I did last year!”.