Rez, rent or buy

[puckluck2]

Originally Posted by ken0042

So for everybody saying to buy- what happens when she wants to move at the end of school? The realtor costs involved in selling would kill any amount gained in mortgage payments. Sure- she could rent it out after; which brings about a new set of challenges.

It's an investment and the OP will be really happy in 20 or so years when he has the condo paid off and it is worth 400K or more. Will be a nice little retirement plan while still looking after his kids.

I'd go with renting. You are not "throwing money away" by renting; contrary to what so many people would have you believe. You are paying to have a place to live; without having a long term commitment. Plus the added value I find with renting is it gives you the chance to try out different styles of homes, and find what you like. I have seen so many people "throw money away" by buying the wrong home for them too quickly, and then moving within 2 years.

I would never advise people to rent IF they can afford to buy (whatever that means, because you are usually paying more to rent than you would to buy in my experience).

And you are 'throwing away money" by renting. If you bought, you'd be contributing to your mortgage instead of the home owner's mortgage. Sure there is a potential to lose money if home prices drop but the way the housing market is going it is not likely at all.

And you're right you do get to try out homes if you rent but I don't that is worth the amount of money you put into someone else's pocket. Rental units are long-term investments. If he wants to sell it as soon as his daughter leaves school then yeah it might be better to rent but he can also keep it for 25 years and let a company handle the dirty work while not having to do anything himself and still make a profit down the road.

Not many homes going on the market and an abundance of buyers means you'll likely see the prices go even higher. I bought a rental house a year and a half ago for $210,000. I could get $300,000 for it right now easily. Even after Realtor fees you're still making a nice profit without doing much. Home prices are going up and the people who own houses will be the ones who benefit.

[Flejszon]

Originally Posted by puckluck2

Not many homes going on the market and an abundance of buyers means you'll likely see the prices go even higher. I bought a rental house a year and a half ago for $210,000. I could get $300,000 for it right now easily. Even after Realtor fees you're still making a nice profit without doing much. Home prices are going up and the people who own houses will be the ones who benefit.

Not saying that buying a house is a bad investment, but in your calculation of profit, did you account for all the expenses you wouldn't have paid had you rented rather than purchased?

Interest expenses, property taxes, condo fees, miscellanous upkeep expenses, real estate fees?




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[HelloHockeyFans]

Owning isn't a horrible idea since the place is in Edmonton and is close enough to you that you could take care of anything that comes up as an owner with relatively short notice, however, in my view, be careful about the view that your property investment will surely increase in value in 'x' years. I've seen a number of people get burned because they were over-leveraged (not saying you are) but thought it was a good idea to ride the real estate boom that ended a while ago.

As you mentioned, renting is a good option because there's no commitment and you walk whenever. Renting is a waste of money only under certain conditions at specific price points, but if you actually spend less renting and invest the remaining dollars, you actually come out on top vs. owning if you do things the right way.

I think it's great you're going to help your daughter out with living expenses, so ignore the helicopter comments.

[wooohooo]

I have a apartment I live in by myself about ten minutes walking distance to UA. I'm very quiet and tidy and am willing to rent out for free if she provides all the 'necessary' services.

If you want an application form just send me her picture.

[puckluck2]

Originally Posted by Flejszon

Not saying that buying a house is a bad investment, but in your calculation of profit, did you account for all the expenses you wouldn't have paid had you rented rather than purchased?

Interest expenses, property taxes, condo fees, miscellanous upkeep expenses, real estate fees?




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Not sure why interest matters when I'm not paying it? I am also not paying the property taxes. The renters more than account for all of my expenses and when I do decide to sell the realtor fees will be a drop in the bucket. Sure in the time I own it I will probably have to change a few carpets or even the entire bathroom but that really isn't much in the grand scheme of things,

[Husky]

Originally Posted by ken0042

So for everybody saying to buy- what happens when she wants to move at the end of school? The realtor costs involved in selling would kill any amount gained in mortgage payments. Sure- she could rent it out after; which brings about a new set of challenges.

I'd go with renting. You are not "throwing money away" by renting; contrary to what so many people would have you believe. You are paying to have a place to live; without having a long term commitment. Plus the added value I find with renting is it gives you the chance to try out different styles of homes, and find what you like. I have seen so many people "throw money away" by buying the wrong home for them too quickly, and then moving within 2 years.

Give or take 4 years of principal payments will easily offset realtor fees. Plus, if you do it right most likely have a little rental loss each year and get some tax money back too.

[pylon]

Originally Posted by wooohooo

I have a apartment I live in by myself about ten minutes walking distance to UA. I'm very quiet and tidy and am willing to rent out for free if she provides all the 'necessary' services.

If you want an application form just send me her picture.

Classy thing to say to a father about his daughter. Ask yourself this, would you make that comment to his face?

[Flejszon]

Originally Posted by puckluck2

Not sure why interest matters when I'm not paying it? I am also not paying the property taxes. The renters more than account for all of my expenses and when I do decide to sell the realtor fees will be a drop in the bucket. Sure in the time I own it I will probably have to change a few carpets or even the entire bathroom but that really isn't much in the grand scheme of things,

Well, i'm more applying the situation to the OP. He plans on taking out a mortgage, so there will be plenty of interest expense that needs to come into play. This is especially true because by the sound of it, he plans on owning while she is in school and then selling. If you look at a mortgage schedule, the payments in the first 3-5 years are primarily interst and less principle. This means, he is not in fact actuallg paying off the house in the first few years


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[puckluck2]

Originally Posted by Flejszon

Well, i'm more applying the situation to the OP. He plans on taking out a mortgage, so there will be plenty of interest expense that needs to come into play. This is especially true because by the sound of it, he plans on owning while she is in school and then selling. If you look at a mortgage schedule, the payments in the first 3-5 years are primarily interst and less principle. This means, he is not in fact actuallg paying off the house in the first few years


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I re-read the OP's posts and it doesn't sound like he is sure what he's going to do with it when she is done school. Selling or re-renting is an option but I still think it would be better for him to buy even if he is going to re-sell right when she's done. That's just my opinion and I guess it all depends on how comfortable the OP is taking the risk which imo is a low risk/high reward risk.

[Sample00]

Originally Posted by wooohooo

I have a apartment I live in by myself about ten minutes walking distance to UA. I'm very quiet and tidy and am willing to rent out for free if she provides all the 'necessary' services.

If you want an application form just send me her picture.

dumbass!

[Sample00]

We have several revenue properties but they are all here in the community. I havent had to deal with one 2 hours away. I consider my daughter a responsible person. She would take good care of the place and "manage" it well.
I too, am leaning towards purchasing but ultimately we'll have to make the family decision.
Thanks for the input, keep it coming. All the info helps making an informed decision.

[Cowboy89]

Originally Posted by puckluck2

It's an investment and the OP will be really happy in 20 or so years when he has the condo paid off and it is worth 400K or more. Will be a nice little retirement plan while still looking after his kids.



I would never advise people to rent IF they can afford to buy (whatever that means, because you are usually paying more to rent than you would to buy in my experience).

And you are 'throwing away money" by renting. If you bought, you'd be contributing to your mortgage instead of the home owner's mortgage. Sure there is a potential to lose money if home prices drop but the way the housing market is going it is not likely at all.

And you're right you do get to try out homes if you rent but I don't that is worth the amount of money you put into someone else's pocket. Rental units are long-term investments. If he wants to sell it as soon as his daughter leaves school then yeah it might be better to rent but he can also keep it for 25 years and let a company handle the dirty work while not having to do anything himself and still make a profit down the road.

Not many homes going on the market and an abundance of buyers means you'll likely see the prices go even higher. I bought a rental house a year and a half ago for $210,000. I could get $300,000 for it right now easily. Even after Realtor fees you're still making a nice profit without doing much. Home prices are going up and the people who own houses will be the ones who benefit.

In your mind what's riskier?

A) Buying an asset at the current price level after a decade in which it has outperformed most other assets dramatically?

OR

B) Buying an asset at the current price level after a decade in which it has underperformed most other assets dramatically?

How you answer can illuminate how well you understand the concept of price risk. In essence there is no such thing as a bad investment provided it is at the right price. Buy low or reasonably priced and you can earn a decent return. Buy too high and even an otherwise good investment can lose you a lot of money (especially with leverage of which real estate is typically purchased with).

[Flejszon]

Originally Posted by Cowboy89

In your mind what's riskier?

A) Buying an asset at the current price level after a decade in which it has outperformed most other assets dramatically?

OR

B) Buying an asset at the current price level after a decade in which it has underperformed most other assets dramatically?

How you answer can illuminate how well you understand the concept of price risk. In essence there is no such thing as a bad investment provided it is at the right price. Buy low or reasonably priced and you can earn a decent return. Buy too high and even an otherwise good investment can lose you a lot of money (especially with leverage of which real estate is typically purchased with).

The price point is not the only thing that can keep it from being a good investment. The concept of opportunity cost hast be taken into consideration as well. You may get a good deal and see a positive return, but if you could have taken the same money and invested it elsewhere where the return would have been even greater, this is not a good investment.


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[flamesfever]

I don't know about your daughter, but with so many choices these days, it can be quite difficult choosing a profession. Also, with the modern mindset of many young people, coupled with the employment situation, many take breaks from school for whatever reason, decide to travel before settling down, end up living in common law relationships, etc. Therefore, buying a property, in addition to all the headaches outlined above, would be the lowest thing on my list.

IMO residence, especially to start, would probably end up being the simplest, cheapest, and would also give your daughter the easiest opportunity to adjust being on her own for the first time. I know my son still has some of the first people he met in residence as friends. And in todays work world having connections is what it's all about. I think the old adage, "it's not what you know, but who you know, that counts" is more important today that in years past.

[fundmark19]

Originally Posted by Sample00

We have several revenue properties but they are all here in the community. I havent had to deal with one 2 hours away. I consider my daughter a responsible person. She would take good care of the place and "manage" it well.
I too, am leaning towards purchasing but ultimately we'll have to make the family decision.
Thanks for the input, keep it coming. All the info helps making an informed decision.

Why not purchase the property then hire your daughter as the property manager. This in my mind will do a couple of things:

1. Give her some spending cash each month
2. Give her some entrepreneurial life skills and add to her resume
3. Give her a sense of pride in the property making her respect it more
4. Give you additional tax breaks from the property
5. Give her some life skills that if stuff happens you have to find a way to fix it

If you buy a 3 bedroom place and she rents out 2 of the rooms pay her 10% of the rent for management fees and she can be making 150 + a month for some spending cash.

[Wormius]

What is your daughter planning on doing during summer break? If everybody leaves to another town to work, you would potentially be losing 4 months of rent.

Residence sounds like a far better solution, economically. Food is provided (presumably through a meal plan); no need to worry about vehicle transportation to university; universities generally have enough entertainment and activities to keep people from getting bored.

Buying doesn't seem like a great proposition considering she will only need it for another 3 years, and you'll need to find ways to keep it occupied during summer break, or eat the cost every year.

[Sample00]

Wormius
you bring up a very valid point. One that I have been giving some strong consideration too. The apt/condo will be empty for that time period and payments will still have to continue to be made.
Meal plans arent that great and I suspect one gets tired of the food. She cooks for herself now and much prefers it that way.
When she is finished, we would of course, gift her the apt/condo. And barring that, with an apt/condo that close to the U, i would think renting it out, wouldnt be much of a problem.

[The Coppernian One]

I spent all of my time at the UofA in different residences. Here is what I think it boils down to for you...

Buying has its perks because you're investing in an asset. There's something tangible at the end and if you're near the university there will always be a market.

The value of residence is not the economics (even if it works our cheaper per month). The value is the social networking aspect of it. And I don't just mean the partying. You tend to meet a number of people and develop a friend/support network. This also includes foreign students and those from all over Canada, who bring different perspectives and experiences. Depending upon the residence, some also offer other amenities like gyms, study rooms and (at least when I was there) tutoring. Some have meals provided and others you cook yourself. They are also very convenient being right on campus. A large part of the university education is learning to live by yourself away from home as well as meeting people and doing different things. Residence is the best place for this, but it's not for everyone. Likewise, the type of residence should be looked at too. If this is the UofA there are several very different types available, so don't just look at it as a lump sum. One may be very suitable for your daughter and another not. Residence will also offer additional chances to get involved in different things/groups although there is plenty of opportunity for that outside of them too.

[ThePrince]

I've seen residence go both ways: I've had friend (intentionally not pluralized) take advantage of the proximity to campus to maximize work efficiency, but sadly, more often than not I've seen it go the other way and rez just turns into a huge party and grades suffer as a result.

On the issue of buying vs. renting, my personal opinion is housing is a low priority investment. The headache that comes with owning a house, as well as the opportunity cost of money that could be better spent elsewhere shows me that it's not very desirable to own a house, unless you're planning on living in it for an extended period of time. Another thing that puckluck has forgotten to mention in his advocation of buying, is that if you were to buy now and sell in a few years, you'd have to pay capital gains tax as well, which really diminishes your profit levels. I guess you could mitigate that by putting the house in your daughter's name, and have it as her primary residence...not sure if you are into that.

[Sample00]

First off, thank you to all of you for your valued input. Well, all of you minus one.
Having said that, we've decided that rez is the best option for my daughter for this coming year.
We will re-evaluate at the end of the next year.
Reasons for choosing Rez is for the same that you have all stated. I think she'll get to meet some more/new people. She can attend social functions right there and then stumble back to her room. (I get the fact that its part of the University experience and I think she should partake to a certain degree. I know I did.) She wont have to leave campus to get to class. And she will be with "like minded" people to do her studying.
The purchase option, although I still feel its a good option, is probably not right at this point in time. One of the biggest deciding factors was having the place vacant from May to September and still having to make mortgage payments. At least with the Rez option, you pay while she's there and dont while she isnt. In the short term, yes its money going out the window but its probably better suited for her at this time.
And for the "helicopter" comment from earlier, we all talked at length about it and ultimately she decided what was best for her and we agreed.
Thanks again for all your input. It was greatly appreciated.