My husband and I were fortunate enough to buy our downtown Toronto home before prices shot through the roof.
That doesn't mean we don't struggle to balance mortgage payments with the many other costs facing a young urban family, but it does mean that we don't need to go through the hassle of upgrading to a larger house. We love our neighbourhood and thankfully, we have enough room here to accommodate our growing toddlers.
Plenty of our friends, however, are in a different situation. With new children here or en route, many are looking to sell their starter homes and buy something a little bigger, or just plain different, from what they have now.
Some of them have decided to take advantage of the massive jump in housing prices by selling now and renting while they look for their dream home. There are of course plenty of other groups who are currently renting - among them those still trying to get their foot in the housing market and aging Canadians who are looking to benefit from the massive appreciation of their family home.
With the cost of owning a home not only exceeding the cost of renting but nearing all-time highs, renting a home makes more sense than ever.
Tax and financial planning expert Tannis Dawson, who works for Investors Group in Winnipeg, has these tips for renters looking to maximize their housing situation:
1.) Be a legal beagle Renting may not be as complicated as owning a home, but there are legal issues to consider. It's important to know your responsibilities as the renter, the landlord's responsibilities and how to move on when you are ready to rent somewhere else or buy a home.
2.) Sign a lease A lease, or rental agreement, is a written contract that lists the rights and duties of both landlord and tenant. Make sure you have one. Because it is a legal document, it can be enforced by a court. Verbal agreements or assurances are hard to prove and not easily enforceable.
3.) Before you sign on the dotted line… While you won't be exposed to interest rate hikes, your rent may rise periodically as a result of rent reviews. Always check to see how rent is reviewed before you sign.
4.) Fly the coop but keep the nest egg One option for homeowners, especially aging boomers, is to sell the family home and use the proceeds of the sale to invest. If done wisely, you can generate income without touching the principal.
5.) Take a practice run The cost of owning a home is, on average, between 10 and 20 per cent more than renting. For renters who are saving towards the purchase of their first family home, develop an enforced savings plan to help you achieve your goals. Calculate the cost of buying and maintaining a home within your means, and deposit the monthly difference between rent and home-buying costs.
6.) Do the math before making a move If a potential homebuyer has $85,000 saved up for a down payment and deposits that, along with just half of the monthly savings over buying ($578 per month), into an account at 8 per cent deferred growth, the balance in just 10 years will hit nearly $300,000 (before taxes). That's a liquid investment that can be used for whatever you want, no relocation required.
7.) The gift of flexibility There's no need to rush into any decision. Whether you are deciding to buy, thinking about selling and deciding what to do with the proceeds of a pending sale, renting buys you time and flexibility. It's easy to move and simple to relocate when you don't own a property. Before making any move, talk with a financial expert and get as many suggestions as possible. Your decision will affect you for the rest of your life.
Roma Luciw is the web editor of the Globe Investor personal finance site and writes for the Home Cents blog.
Roma Luciw