- December 10, 2023
- Posted by: legaleseblogger
- Category: Related News
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Heading: Seeking Advice on Selling and Buying a New Home with AI Legalese Decoder
I am currently residing in a 2,500 square foot house with my toddler, a property that I initially bought with my late husband. However, the upkeep of this large house has become overwhelming for me, especially after his passing. The constant maintenance, from shoveling snow to mowing the lawn and updating aging fixtures, has become a burden. Therefore, I am considering selling the house within the next six months.
Despite being able to afford the property on a single income, the maintenance and size of the house have become unmanageable for me. Additionally, I am contemplating a move across the country to be closer to my family, which may result in selling the new property within the next five years. This has led me to consider the option of renting instead of purchasing a new home.
Considering my annual income of $150,000 and the potential equity of $300,000 from the sale of my current property, along with my savings and investments totaling approximately $200,000, I am weighing the option of purchasing a smaller, newer, and low-maintenance home within the range of $700,000. Alternatively, the equivalent rental property in this market would cost approximately $3,000 per month.
I am uncertain whether buying a new property would be financially advantageous compared to renting, especially given the potential need to relocate again in the near future. I am looking for guidance on the buy-vs.-rent calculation and the advisable duration of residence in a new property to make it a more favorable decision than renting.
The AI Legalese Decoder can be instrumental in clarifying the legal intricacies involved in selling, buying, and renting a property, providing the necessary knowledge and understanding to make informed decisions in this complex situation.
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Im not as good at maths as all these other people but respect to you for holding everything down for your child in what sounds like a very challenging situation.
Based on your numbers: $3k per month is $36k per year which is 5% annual return on a $720k property. That means rent is pretty similar to buying an equivalent $700k property, so unless you are speculating on property values or donÔÇÖt want to risk being priced out of a specific place then renting is probably better. It also depends how you invest, many people are better sitting on real estate investments because itÔÇÖs tangible and easy to deal with.
Your situation sounds perfect for a condo, particularly if you are considering a move to one of the bigger cities in Canada.
Condo fees suck, but they take care of all the little things that are weighing you down. It also keeps you in the property market, so you don’t get left behind if the market continues to grow.
But keep in mind that condos may be less liquid in some smaller or secondary cities if you need to sell. Even if you are happy with whatever you’ve chosen you may still need to sell if you find someone new and plan to move in together.
Maybe a third option would be to keep your house and look at the cost of some maintenance help. I’m just thinking in financial terms it might be competitive with the other two. Minimum immediate effort too. Emotionally, it might be heavy to stay there and I hope you’re acknowledging you might have needs there too. *Virtual hugs*
You’d have to set what tasks you’re willing to delegate, but snow clearing and lawn care are pretty easy to get quotes on.
Edit to spare OP replying: In other replies OP does confirm staying is emotionally difficult and maintenance services have been an issue in the past. So this might not work for her.
A lot of people are suggesting a condo, but I’d like to throw a little water on that idea.
I left a condo (townhouse) in 2022 to move into a house. Aside from the obvious reasons for doing this (more space, backyard for the kid), the main reasons for me to get out of the condo were as follows:
* Land value. The condo has virtually no intrinsic value beyond the structure, which is technically a depreciating asset. The structure will need constant maintenance to keep its value which is a major problem as I’ll outline below.
* Condo/Strata fees. These things will continue to go up no matter where you live. Even without graft or senseless/wasteful decisions on the part of your condo council, you’ll always feel like you’re being ripped off because within the cost base are things that are constantly going up. Examples include:
* Insurance: it goes up every year, there’s a limited number of insurance providers, and they will increase your premiums for any reason they can think of. Our premiums increased one year because of flooding that happened across the country earlier in the year even though our condo was built on a hill.
* Repairs: every repair job is farmed out to multiple contractors for bids, all of whom seem to charge more when they realize it’s a condo, and many of which require engineering oversight which immediately increases the cost. Most repairs are unreasonably expensive and anything that’s on the outside of your unit – which would otherwise be easily fixable yourself – become a council matter and the cost is basically at least tripled vs. a standalone house. Think about painting the outside of the unit, and then ask yourself why it might cost $3000 per unit when it’s only one wall.
* Special levies: the council may or may not have enough money in the contingency fund to pay for major repairs, but it doesn’t matter because any building beyond a certain age will have at least some repair jobs that don’t come out of contingency. You will be billed for these out of pocket.
* The people you have to live with. I’m probably going to get downvotes for this, but the people you share your building with will be a problem on multiple levels:
* Some of them might be a nuisance on a personal level. Loud neighbors, neighbors with windchimes that happen to be right under your window, people who complain about your toddler running about… etc.
* Some of them will be a nuisance to the council. They will be obstructionist and deliberately vote against every measure the condo council attempts to enact just because they have personal issues with the council, or they have mental illness, or both. We had one guy attempt to disrupt a meeting with a sandwich board filled with “evidence” of the strata council of five years prior having been on the take. He was waving around a very large pair of scissors while he did it.
* Some of them will not be able to afford things like the special levies. The roof needs replacing, the contingency fund is low, the levy goes out, and the money doesn’t come in. Or doesn’t come in immediately. The roof either gets repaired on borrowed money (more costs in the future) or it gets delayed or both. Delayed repairs will cause continued degradation of the building and result in more costs down the road.
* Many residents will vote against things that are in the best interests of the building and of long-term residents. Typically it’s voting against certain repairs or increasing the condo fees. A well-run condo will have an engineering/depreciation report that details the financial requirements of all repairs expected for the next decade or two. The math will tell you if the condo fees are high enough to support the necessary repairs for the condo to maintain its value over the years – but many of your fellow residents will not agree to any increase in condo fees because
* Who likes paying more money?
* Some of them are financially illiterate
* Some of them are obstructionist and will think the depreciation report is a lie
* Some of them are thinking of selling and don’t want to spend any more money before they leave
* Some of them simply won’t be able to afford it
I’m not in the same situation as you, and you have both my greatest sympathy for the loss of your husband and the greatest respect for continuing to raise your child in the best way possible. But if I were in your situation, I would not want to move to a condo because all the reasons I moved away are still valid ones. If you have any way of downsizing to a smaller, cheaper house – preferably one nearer your folks, I think it would be the best option for the long run.
I like the advice others have given to rent until you have a better idea of what your long-term plans will be. That way, you preserve the most flexibility for yourself.
A condo might be a nice way to get access to amenities, lower your workload (more time for yourself and your little one), if you’re open to changing from the house lifestyle. The only caveat I’d add is to try and find a building with rent control (if you’re in Ontario, that’s anything that was built before 2018) just as a way to build in some predictability.
I suspect a 2BR or even a 1BR+Den could work for you and the little one (2BR would probably be best).
FWIW, I’ve got a family of 4 with 2 kids (6 and 3) in a 2BR condo and we love it.
The small size has downsides (no getting around that it’s less space for you and your stuff) and upsides (less space means less cleaning, and you’ll be able to keep an eye on your toddler no matter where you are in the condo, plus you’ll probably buy less stuff since there’s less space to accumulate things).
Going back to renting for a spell could be a good choice. You already have so many responsibilities, and renting takes a few of them off your plate. If you might move again within a few years, the transaction costs of buying and selling are almost guaranteed to outweigh any financial benefits of owning.
You can invest/save the equity you get out from selling the current house, and be in a position to buy again in the future if you wish too. I think if you rent for ~4 years you may even become eligible for the FHSA, though double check that.
700k new place at 6% mortgage interest/opportunity cost of capital, 2% taxes + insurance + maintenance, would give you a cost of ownership around $4666 per month at the moment. If an equivalent rental is $3k per month then I think you’ll be coming out well ahead financially by renting.
You should check if you can move your mortgage vs getting a brand new one depending on the amount. If you have a lower rate, you might be better off buying something vs renting.
Sounds like you have options. Its really a personal preference and lifestyle choice at this point. Do you plan to live in the same city in the long run? Do you want to move to a better school zone? Is there rent control in your city? How do you handle stressful situation with landlords? Do you want to try living in condos vs houses etcthese are something to consider.
If I were in your shoes, IÔÇÖd get a mortgage pre-approval and find out the monthly payment on a potential purchase. If you the monthly comes out lower or similar to renting, IÔÇÖd buy it.
I think renting is the way to go for sure.
It will give you back the most time, as the landlord is responsible for many of the annoying homeowner tasks. It will also give you the most flexibility. If you move back it will be stressful if home values make it hard to sell.
So, we often buy life insurance with the goal that if one spouse does, the surviving spouse doesn’t need to uproot their life and the life of their kid by moving houses, changing schools, etc.. However, that is just a general guideline, a starting point, and now that you are actually living the situation, your specific needs (and those of your child) matter a lot more than general advice.
The age of your child matters. In your case, there is no school to pull her out of, so really the only thing keeping you in the house is whether or not the house itself brings comfort, stability, familiarity.
But you also want to weigh that against what is practical. Having support and closeness and relationships with the child’s grandparents is important too.
The house is too big for you and her alone, and it doesn’t really make sense to keep the house for a possible future partner who may not even want to live there.
If you want to stay in the house you could hire a cleaner, landscaper, etc. and deal with the house that way. But I get the impression that you want to sell the house and move closer to family, and that your child may benefit from that decision in the long run, perhaps moreso then keeping the familiarity that comes with the house. But ultimately that is something that only you would know.
I do think you could make a compelling argument for deviating from the “default” option of staying in the house. Ultimately it is your decision and there isn’t really a right or wrong answer.
If you move across country, there are more factors than just financial that go into the “buy vs rent” decision. Normally I’d say rent for 12 months first, but if you know the specific area well, and the schools, and don’t want to put your child through a second move, and don’t want to risk being kicked out by a landlord selling, then buying could make sense here.
Moving in with your parents for a brief time while you shop around for a new house might also be an option worth considering.
Sorry for your loss. These situations are unfortunate and very painful. Especially having to continue as a single parent.
Some thoughts, personal finance related and otherwise:
– Generally the rule of thumb post a loss like this is to wait a year to make big changes. YouÔÇÖve done that, so you have hopefully had a good handle on the pros/cons of living in the home alone and are in a good headspace to make life altering changes.
– I strongly recommend counseling or therapy if you arenÔÇÖt already there. Think of this as a cheap investment in yourself and to help you make the best decisions going forwards (which should be the most cost effective).
– That said I can support downsizing but would suggest making the decision on moving closer to family first. Then you can make one move.
– There are a couple rent bs own calculators like this [one](https://www.calculator.net/rent-vs-buy-calculator.html?chomeprice=700%2C000&cdownpay=40&cinterest=6.5&cloanterm=25&cbuyclosing=2&cpropertytax=1.5&cpropertytaxincrease=3&chomeinsurance=2%2C500&choa=0&cmaintenance=1.5&cvalueincrease=3&ccostinsuranceincrease=3&csellclosing=7&crental=3%2C000&crentalincrease=3&crentinsurance=15&cdeposit=3%2C000&cupfront=100&cinvestreturn=5&cfedtax=25&cstatetax=0&cfilestatus=MarriedJoint&x=Calculate) you can try out with your numbers. This is a financial picture, doesnÔÇÖt factor in time for mowing, snow shoveling, maintenance, etc.
– Rental home will probably include shoveling and yard work just the same as your current place unless you have it included in the rent. As a former landlord I always had that back to the tenant as a rebate so they were compensated for it but had a contract to do it.
The best decision I made when I got divorced was to insist we sell our house, and then I downsized to a townhouse where all the outside maintenance was covered (lawn mowing, snow clearing, and all external home maintenance). It gave me more time to focus on my kids and not endless outside chores. And now that they are grown and out of the house, I am right-sized for retirement, and will have a paid off house at that point, which adds to my security. Small (2BR, 1400 Sq ft + finished basement) is a good size for a small family.
What are your long term goals OP? Would you eventually want to land back in a house similar to what you’ve got now? Have you considered hiring out certain services (snow removal, lawn cutting, house cleaning, etc.). The price of these services dont sound like they would break the bank for you, but would make a huge impact on your quality of life. Just a thought, as it sounds like a wonderful home. Moving out, you may never be able to afford something similar again. Plus all the money you would lose to realtor fees, land transfer tax, etc.
I’d buy a larger condo if I were in your situation
Just search Google for holy potato rent vs buy calculator , it clearly gives the math for all these numbers and thank me later ƒÿä
See if you can find a small bungalow, people are saying to buy a condo but having a small child in a condo sounds like a nightmare.
This isn’t strictly financial but a personal emotional decision, as you point out. I think the rule of thumb is buy if you will be in a place more than five years, give or take. There are significant legal and realtor fees that come with with buying and selling. So if you don’t know where you will be living, I would get out of the place you are no longer comfortable in, rent for a while and see how things develop. Sorry about your loss.
DonÔÇÖt forget to factor in the cost of breaking your mortgage if you donÔÇÖt buy another home and end up renting instead.
This would completely depends on where this property is located in. Dead smack in the middle of Toronto / Vancouver? You got to be completely stupid to sell.
That last thing a house to a person is a house. It is always an asset. Assets scales with inflation and all the money printing the government do.
Children tend to develop better friendships, have better schools where the majority of people in the area are homeowners. But a smaller home and if you can move closer to family even better
Buy a condo.
downsize. Blackrock bribing politicians via the Century Initiative to artificially grow the value of their 14 billion dollars in Canadian real estate holdings means we’re going to continue to import more people than we can possibly build homes for, as we already are. The supply side inbalance is going to persist for years to come. Even the conservatives are not going to address the source of the problem, which is massive immigration.
Property values going up via demand as an owner is good for you.
Property values going up as a renter is bad for you. Assuming your landlord sells your rental unit to another investor for a much higher price than he bought it, that investor is going to want to recoup the investment costs in the form of much higher rent.
EDIT: Numbers. we do not have the ability to meet demand, which both parties plan on driving up further.
https://www.cbc.ca/news/business/cmhc-housing-report-1.6965250
Personally I’d take out a heloc loan, build a rental suite and use it to offset some bills.
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As long as you dont live in trash-central, its pretty easy to weed out shitty tenants with the currency vacancy crisis, despite what reddit says.
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Downsize to a low maintenance house preferably with solar or near net zero efficiency. Rent and energy will increase endlessly but you can freeze your housing costs buying today.
If you plan on remarrying you could stay there?
Dont pay someone elses mortgage. Downsize, generate more equity.
Kinda confused, is the current house paid off? I’m not seeing how paying some neighbourhood kids to shovel and mow the lawn is more expensive than buying a house double the cost. How much is a cleaning service in your area?
Can’t afford to live in a house on a 150K income. What hope do the rest of us have.
Downtown Toronto is an outlier. Definitely better places to buy and get more for your money.