Renting Vs. Buying a House: Which Is Right for You?

I once had a friend tell me that he would never buy a house. 

“They’re too expensive,” he said. “It takes forever to pay them off.” This friend had hundreds of thousands of dollars in cash, so he could definitely buy a house in Edmonton if he wanted to. His reasoning was a personal opinion, and it was valid. But I still wanted to say: “So, how long will it take you to pay off your rental?” I didn’t, but maybe I should have. Then we could have had a discussion about the costs and benefits of renting vs. buying a house. 

Look, I know home ownership isn’t for everyone. A lot of people rent, even people with the means to buy a home. In fact, recent data suggests that about one-third of Canadians rent their residence. My friend is one of them. He just doesn’t want to own his own home. And, while the financial piece of the equation looms large for many people considering home ownership, money isn’t the only thing to consider. I sell houses and condos in Edmonton and I think owning your own home is great, but I understand that it’s not for everyone, at least not at every stage in their lives.

So, what about you? Is homeownership right for you? Let’s have a look at the advantages and disadvantages of buying vs. renting a house or home in Edmonton

Oh, and if you do decide to buy, I hope you’ll reach out so I can help. 

Homeownership is often portrayed as the ideal, but it has its downsides too. Here are a few.

The Cost

To buy any property, you’ll need a down payment. That can be as little as 5% of the purchase price or much more, depending on the type of property you’re looking to purchase. A condo or a house under $500,000 is just 5% for a down payment, but that’s still a significant sum. As a result, this is still a big barrier to entry for a lot of people. Gone are the days when you could put 0% down on a property when you buy. Saving up thousands of dollars might take years, and sometimes housing prices are rising faster than people can save. This is a common and frustrating problem; just when you think you’re ready to buy, you find that the finish line has moved away from you.

The Commitment 

Compared to renting, to own a home is to commit to something, at least for a few years. In fact, I would say that you shouldn’t buy a house if you aren’t planning on being in it for five or more years. This is partly because you are getting a mortgage that has a term. The term is how long you’ve agreed to keep that mortgage on the house before you renew. There are penalties for breaking that agreement early. Plus, since you aren’t going to have a chance to pay down that loan significantly in the first few years, you’re not going to have much equity in your property for a while, and selling early has its costs, including real estate fees, land title fees, lawyers fees and that mortgage payout penalty. (You can see a breakdown of selling costs in Sell Your House in Edmonton: Here’s How.) This often makes short-term ownership a foolish financial move. The market could also dip in the first few years, further eroding your value and turning your equity negative.

When you buy a property you are kinda stuck with it. You can sell it, but it won’t usually be quick and it will cost you. Besides the standard selling costs that you might pay any time you sell, there are taxes to pay for properties held for less than a year. In Canada, if you have a principal residence and you decide to sell before a year is up, you may have to pay capital gains tax on any profit you made from that property. There are exceptions, but they aren’t likely to apply. So don’t think you’re going to get away with quickly flipping houses and not paying taxes, even if you live in those houses. You are committed to a year for tax reasons and longer than that based on other costs. Depending on your lifestyle and goals, that kind of commitment may not be right for you.

The Maintenance

When you rent, you are not responsible for maintaining your property yourself (besides cleaning). If you own a detached home, it’s all on you. If you own a condo, it’s on you to maintain the interior and sometimes the exterior as well. Maintenance is time-consuming, costly and sometimes stressful. So, if you aren’t prepared to maintain your home, do not buy one! Maintenance is part of the commitment of owning and should be carefully considered before you decide to buy. If you aren’t handy or don’t have the time to be your own handyman, that’s OK, you just need to budget for labour in your repairs and maintenance.

And don’t assume that buying a new house gets you off the hook on this one – I’ve heard this logic more times than I can count. New houses still need maintenance! I live in a neighbourhood with lots of new infills and they are starting to look shabby at just a few years old. New neighbourhoods in Edmonton can start to get run down rather quickly as well. Homes need continuous maintenance to stay in top shape – something, somewhere is always wearing out.

When you’re looking at buying vs renting a home, renting has some key benefits over homeownership as well. Whether they’re beneficial for you really depends on your goals, lifestyle and financial situation. Let’s take a look.

The Flexibility

Renting’s benefits are quite the opposite from home ownership’s drawbacks. You don’t have to commit (for long). You can sign a six-month or one-year lease and decide to move after that. If you have a temporary job position, unsteady employment or any kind of tentative personal situation, you can be in and out of a place pretty fast. This is great for students, people just moving to Edmonton and those in a new relationship. If you aren’t sure where you want to live or for how long, renting is a perfect option for you.

The (Lack of) Maintenance

When you’re a renter, you don’t have to fix a toilet, replace the fridge or clean the gutters. In fact, besides cleaning, many rentals are virtually maintenance free. 

The Cost … but It Depends

Cost-wise, renting can be cheaper than owning. It most certainly is in the short term. After all, if you don’t have the money for a down payment or the credit to buy a house in Edmonton, you can still have somewhere to live! That said, this calculation changes depending on the area in which you live and your situation. A 2022 report by Zoocasa found that in Edmonton, buying edged out renting in terms of monthly costs by a couple hundred bucks.

In the very long term, homeowners tend to win out too. After all, when you pay rent, the money is gone for good. When you are paying down a mortgage, you are actually paying down an asset that you will own in the end. That can be a tough benefit to beat.

The Instability

Lack of stability is a major drawback to renting. Once your lease expires, you may not get a renewal. The landlord may choose to sell the property at any time (although they can’t kick you out until your lease is over). And even if you are renting month to month, the property can be sold and you could be kicked out after three months’ notice. Being in limbo like this is not a comfortable feeling.

Besides being evicted, you are most certainly going to see rental increases as a renter. These don’t need to be fair; they will be based on what the market can handle. In Alberta, rent can only be increased once per year, but there are no rental caps. If your landlord wants to double your rent, they can. I know of a business owner who spent thousands to renovate a commercial space only to have his rent double after a five-year lease. All the work he put into that space was lost and someone else moved in and started a new business there with all his sweat equity. If he had bought his own location, none of this would have happened. Sure, it would have been expensive in the beginning, but that’s the cost of stability.

The Lack of Control

Renting means you have much less control in your home. You do get to live there and do as you please, for the most part. But your landlord or a maintenance person can come into your personal space any time they’d like as long as they give 24 hours’ notice. You can’t paint without permission. You can’t hang new curtain rods without permission. You can’t change anything that’s attached. You get the appliances and fixtures you are given. There will be no changes without someone dictating them. Heck, you might not even be able to choose the temperature setting depending on where you live. Some people don’t mind all of this at all. Others chafe at this level of restriction.

The Lack of Equity

As long as you are paying down a mortgage, it’s a bit like forced savings. That might explain why homeowners tend to build significantly more wealth than renters – 40 times more, according to data from the National Association of Realtors. This wealth comes from property appreciation and the accumulation of equity over time. Money burns a hole in almost anyone’s pocket. Putting that money into a property is one way to ensure it’s available in the future.

The other cool thing about owning real estate is that at some point – whether it’s 10, 20 or 30 years in the future –  that property will be paid off. That means no monthly payment. You’ll still have taxes and bills and maintenance, but no monthly mortgage payment. 

Imagine renting for 25 years and then, at some point, not having to pay anymore. Sounds fantastic, right? You can borrow against that equity. You can sit on it in case you need the funds in your retirement. You have an asset now. You have options. This never happens with a rental. You can rent for 50 years and have nothing to show for it at the end. You lived, sure. But so did your friend who bought a home or condo. And now they have thousands of dollars a month freed up. At some point, payment obligations end for owners. Renters have fewer to start with, but they continue forever.

There’s a lot to consider when deciding whether to rent or buy. The first question you have to ask yourself is “can I afford my own home?” This is the first thing I ask potential clients. If they don’t have the money, no amount of willpower will get them a property in Edmonton. (That’s why I always recommend that people visit a lender or mortgage broker to find out what they can afford before they look at a single property.) After the money question, you get to do some deeper thinking. Do you want control? Do you want to pay for that control by having to maintain a property?

There are some places where renting is the only option – buying is too far out of reach for most people. In Edmonton, we’re still pretty lucky; real estate prices are quite inexpensive. In fact, Edmonton’s housing market is still one of the most affordable in Canada. That leaves a lot of people with a big decision to make, one with huge implications for their future. Is owning a house always better than renting? Not at all. But it sure has its perks.

Thinking about buying a house in Edmonton? Contact me: I can talk you through whether buying is the best fit for you.

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