Financial, Legal, & Realty

Selvan Puvaneshwaranathan on the Arguments for Renting vs. Buying Using Toronto as a Case Study

How Toronto Highlights the Important Pros and Cons of Both Models

In order to choose a place to live, one must take a lot of factors into consideration before making any decisions. This includes the location, weather, proximity to their job, and many other important elements. Most importantly, however, they must analyze the applicable costs. That way, they will be able to choose a location that satisfies their needs and fits their budgets. Unfortunately, however, finding a perfect spot that will meet every single one of someone’s requirements is becoming increasingly difficult. To better understand why, consider one of Canada’s most popular business hubs – Toronto.

As an area that is characterized by millions of visitors and a constant fast-paced living environment, Toronto has no shortage of demand and the number of people who are interested in living here is always high. It is important for individuals to have a good understanding of their finances, when making housing decisions. If they can afford to purchase a home, it will be a forever investment. For those who are still making transitions through life, it is sometimes more difficult to find the funds to make such a purchase. More specifically, covering the expense of their housing will generally consume a large portion of their capital given that the market in Toronto is quite expensive. Therefore, it is important to make the right decision when it comes to one of the most common questions that people who are moving somewhere must answer – to rent or to buy?

Own Versus Rent

The Toronto market has always been interchanging. As many individuals find themselves in different points of their life, it is imperative they are making the right housing decisions for themselves. In order to buy a home in the Toronto area, there are several areas that are important to know. Mortgages are one of the areas which individuals find themselves really intimidated. It is important to consult an advisor to help determine how much finances would be necessary to purchase a certain house.

The more money people can put down initially, will make their cost of living less expensive in the long run. It is beneficial to know that payments made are going towards owning a specific place vs. continuously paying into an apartment or condo owned by an outside individual. It is the freedom and luxury that comes with owning one’s home. For the result, it may lead to be the cheaper option all along.

In Toronto, Selvan Puvaneshwaranathan has seen the rise in the market and does not believe it to be slowing down. Buying a home is ideal as an investment, as well as those looking to start their lives. He recommends that if people are financially stable to make that purchase, that it would not be something to regret. The obvious purchase of a home in downtown Toronto is difficult. Searching in different areas of the GTA will prove your search to be more positive.

Rent Versus Own

The reason why this dilemma is so prominent is that there are countless perks to both options and spending a decent amount of time figuring out which route to take could help one save a lot of money in the long run. So, when it comes to Toronto, what is the difference between buying a home and renting it in terms of required capital?

The market in Toronto most commonly mandates one to make a down payment amounting to at least 5 percent of the overall price of the property that they are interested in. Of course, this is the bare minimum and will generally pull a higher interest rate than if someone puts down more money. Nevertheless, to remain as conservative in the comparison as possible, consider a prospective homeowner who is trying to decide between buying and renting a $100,000 property. Well, the 5-percent down payment will be $5,000 in this case.

If that same person decides to rent this apartment, however, they are looking at approximately $500 a month given the current market conditions. So, if they pursue this route for an entire year, they will effectively spend $6,000 on rent. Thus, renting will cost them $1,000 more than putting a down payment would. Nevertheless, it is important to note that the down payment must be paid in full while the $6,000 rental cost was divided up over 12 months.

Thus, according to a real estate expert who works in this area, Selvan Puvaneshwaranathan, those who can gather the necessary capital should always try to buy their homes. That way, they can turn them into investments after a few years and potentially sell them for a profit. Renting, on the other hand, will not provide them with an opportunity to recoup their capital as they will never be the rightful owners of the real estate in question.

The Vice-Versa Scenario

When it comes to the opposite side of the decision and someone is trying to decide if they should sell or lease their own property, the analysis is fairly similar. First, as Selvan Puvaneshwaranathan reminds, the homeowner must figure out if they would like to have a perpetual source of income or just a large lump-sum payment. Obviously, the first alternative is related to long-term leasing as they will be entitled to rental income. The second, however, will take place when the homeowner sells their home.

Due to the current state of the real estate market in Toronto, a lot of specialists are prone to renting instead of selling. This is because the prices are not as high as they are going to be a few years from now. It is beneficial for those who are financial stable, to take the opportunities to look further into the purchasing of homes. Thus, getting a decent flow of income for several years before selling seems like a much better way to approach the venture.

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Adrian Rubin

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