The above tweet references an interesting article about the real estate market. What I find interesting is the part of it that recognizes that the Toronto real estate market is the sum of many different parts. Condominiums are one part of the market. Because rental properties are rarely built in Toronto (that’s the problem of rent controls) condominiums do provide a source of rental housing. Furthermore, those “rental condos” put into service after 1991 may not be subject to rent controls. Bidding wars have erupted to “rent” premium Toronto condos. But, the question remains:
Are Toronto condos a good investment?
Introduction – The Questions of Owning vs. Renting Continued
I once heard a Toronto renter comment that:
“I can pay rent or I can pay interest”.
One pays “interest” through a mortgage. At some point the mortgage will be “paid off” and the house will be owned “free and clear”. “Rent” payments will continue forever. Does this mean that “rent” (in the long run) is more expensive than “interest”? Not necessarily. Remember that “capital has value”. Remember that the “equity” in a home can be tapped for other purposes. I don’t think there is a clear answer to the question of whether “renting” or “owning” makes more sense economically. That said, life is about more than economics. There are many lifestyle, family and emotional issues that impact on the “rent” or “own” decision.
The Economic Analysis …
There are many who presume that owning is always better than renting. Is this always true? Not necessarily. I have explored this question in a variety of posts. There are clear instances where it can make sense to rent rather than to own. Real estate is a capital asset. The question is often how to make best use of your capital. Should your capital be tied up in your home? Should your capital be used for other investments?