To Buy or Rent in Ottawa?

Here is a common question that people may think of when deciding on purchasing a condo/house in Ottawa, whether it would be better to rent or to purchase a place since it is a big financial decision in either case.

I will tell ahead that the winner is TO BUY rather than TO RENT in Ottawa, it strongly depends on number of years one would stay in either property. Below is an example of a condo property that one would live for 5 years.

I will use an example of a rental property/condo here in Ottawa, somewhere close to Carleton University.
The rent for the place is Canadian: $1800 dollars + utilities
The purchase price for the condo around that area would be around $300, 000 to $400, 000, so lets take the median and say its $350,000 for the purchase.

Costs after 5 years

Buy Rent
Initial costs $20,518(5% down+CMHC+legal+inspection) $3600 (1 month rent as deposit. Some places charge 2 months rent as deposit.)
Recurring costs $136,680 (5 Year mortgage, tax and condo fees) $114,000 (5 year estimate cost of rent, with yearly increase)
Total Profit Estimate $100,000 $55,000

Detail Purchase Price

Purchase Price $350000
Monthly Condo Fee are around $350
For down payment minimum 5% $17500

As of today a low rate for 5 years closed is 2.96% mortgage offered.

Inspection, CMHC PST

Home Inspection with Tax $339
PST on CMHC Insurance $838

Legal Fees

Legal Lawyer Fees $1,225
Registrations $144
Disbursements $260
Tax (HST) $212
Total Legal Fees $1841

Total Cash & Spending

Your total mortgage borrowed $342,974

Total cash cost for purchase $20518
Your monthly payment to mortgage is estimate around $1618
Your estimated property tax per year $3,725
Total condo fees and property tax per month $2278
5 years, your mortgage amount left $292,986

The average increase of a property here in Ottawa can be around 4% per year over 5 years (depends on market value goes up and down but it averages out to be around 4%), thus over the 5 year period your property would have gained an estimated value of $70,000.

Assuming that you did not do any major renovations or maintenance, you lived at the place just like you were renting, and after 5 years you were selling, and just for simplicity you sold the condo for $420,000 at the 5 year mark.

Your amount after mortgage payout ($420000 – $292986) $127 014
Sum 5 Year mortgage, tax and condo fees $136 680

If you have rented for 5 years and with an increase of rent, the estimate cost is around $114, 000

Difference between rent and owning the condo/house in Ottawa is $22, 680
left over investment money for mutual funds at 6% per year $4568

Let’s say over 5 years you have around $25000 in investments, and adding your down payment that you did not have to pay since you were renting would have been estimated around $55,000.

As one can see the amount that you end up saving by investment isn’t as large as purchasing and selling of your place, where the payout is estimated close to $100,000.

Additional things to consider

There are certainly circumstances that one has to decide upon, like maintenance of the house, appliances if you own etc., market value going up and down. It is harder to predict the housing market, the amount of time you will be staying at one place also affects all the calculations. The taxes may increase over each year. Take those into consideration when you plan to rent or purchase, and if you get a roommate and rent out one of your rooms to a student while living in the property, then you would have more of a profit.

The New York Times has a great article on rent versus buy with a calculator to help you to find out which one suites better.

If you do plan to purchase, feel free to contact me and I will be able to find the right home and right price for you here in Ottawa.

Author: Nilay Ertemur

References: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

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When it comes to renovations, the biggest fear is going over your budget…

Here are 10 first hand tips from our personal experiences on how to save and be frugal on your renovations:

1. Declutter your house. Sell things on kijiji and similar places
Before any renovation task that you want to do in kitchen, bathroom, basement etc, the very first thing you wish to do is declutter things that you may not need anymore. Is that treadmill/xtrainer just collecting dust? Sell it at a decent price. Research how much things are going for first for similar items and sell it 10-20 dollars less than the average price you find. This will bring you additional dollars for your projects.

2. Go to a local hardware store’s discount aisle
Run through the aisle in your hardware store and check the clearance items before you buy regular priced products. You may find things at a fraction of the price. Lowes and Home Depot sell items on display also at a discount. Lets say you need a new vanity light and there is only one left which is the display model, you can request the associate to buy the item on display while giving you a discount on it since it may be a discontinued product.

3. Visit discount stores like Habitat For Humanity Restore
Restore carries a lot of donation items from home owners to retail stores. Its more like Value Village of home renovations with some new products as well old ones!
Each store has different items (There are two in Ottawa). Its more of a treasure hunt. Restore also carries paints that are brand new.

4. Get mistint paint from Home Depot or Lowes
Mistints are colours that did not mix like the same colour as the customer wanted. Home Depot and Lowes (or some others) sell those cans at a fraction of the price. You may actually find colours that you want in the mistint colour section, ask the associate where they place their mistint colours, sometimes they have a load of them usually in summer time when people heavily paint.

5. Do your own demolition
If you are replacing a counter top, by removing it yourself you will save up to 500 dollars of the cost. If it is in good condition, you may even have Habitat For Humanity to come and pick it up for you after you remove it, eliminating the need for finding a dumpster bin and paying extra for it.

6. Partner up with a contractor
Some contractors do allow one to partner up with them so that you are helping them or they are coaching you how to do certain things, this will eliminate some of the costs associated with doing renovations. Note: Some contractors do not do this since there is a liability issues.

7. Schedule your renovation during a downtime
In summer it is peak time for renovations, you could get a good discount by scheduling them in early spring or in winter when there isn’t much work to be done.

8. Make decisions early
Last minutes changes cost everyone, planning the colour of the hardwood floor or tile way ahead is better than planning it in the midst of the job and/or requesting for a change. The hardwood or tile can be sold out or might not be in stock for over a month, which will cost more delays and more money. Making decisions ahead of time saves you a lot!

9. Have family and friends who can help
It is always easier to do house renovations with the support of trusted people, sometimes underestimating the stress, time and effort that renovations will cause, one can find themselves in difficult situations.

10. Attend home hardware store trainings on various home improvement topics 
This will save you time, encourage and motivate you to start your projects. There are also good books on the shelves in home hardware stores where you can take a good look and get inspired.

Health tip: In older homes, pay attention to toxic material, and don’t get exposed to these while renovating, if in doubt, ask a consultant or a health inspector! And please always recycle, recycle, and recycle, even while renovating… 

Nilay Ertemur
Authors: Nilay Ertemur-Taswar Bhatti

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