Buying or Renting in Ottawa: Which Is Right for You?

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Renting or buying. What is the right choice?

The “should I buy or rent?” debate has been around for ages.

At some point, young professionals must make a decision about which route is best for them. As they research the pros and cons of buying or renting in Ottawa, they’ll discover that there’s a lot more to it than the oft-used “buying a home is better because you can build equity, whereas you’re just throwing money away by renting” rationale.

That’s an overly simplified argument with flawed logic. For many people, renting makes more sense and can still afford them the opportunity to build wealth in ways besides owning a house or condo.

Whether or not you should rent or buy will depend on a number of factors, including your financial situation, career stability, personal goals, and variables beyond your control (such as fluctuating property values).

Let’s take a look at the benefits of apartment renting in Ottawa, why there’s more to homeownership than meets the eye, and some alternative ways to start building a nest egg.

7 benefits of renting in Ottawa

Renting an apartment in Ottawa (which has a lower monthly rent cost for a 1 bedroom unit than in Vancouver, Toronto, and even a number of Toronto suburbs) has its perks. Here are a few of them:

1. Renting an apartment has a much smaller upfront cost than buying a house. The high cost of buying a house nowadays is a barrier to entry for many people. A recent Generation Squeeze study found that Canadian millennials take 13 years to save for a 20% down payment on an average priced home. In 1976, young adults took five years to save for a home purchase.

When you rent an apartment, you’re looking at an upfront cost of paying your landlord your first month of rent and a security deposit (commonly known as “last month’s rent”). Compared to buying a home, that significantly smaller financial commitment makes renting far more practical for a lot of young adults, especially if they’re dealing with student debt.

2. Repairs and other home maintenance tasks aren’t your responsibility. One of the biggest advantages of renting is that if anything in your living space isn’t working properly, you don’t have to worry about fixing it yourself. With a simple call to your landlord or by filling out a repair request form, someone with expertise can handle the problem.

Not everybody likes the responsibility of owning a property that requires upkeep – like mowing the lawn, trimming the hedges, and shovelling the driveway. That makes renting ideal for anyone who prefers to spend their free time in other ways.

3. Renters aren’t burdened by home maintenance costs or property taxes and pay less for home insurance. A secondary benefit related to home maintenance is that as a renter, any repair or upkeep costs are not your financial responsibility.

Unlike homeowners, renters are not required to pay property taxes. Renters also pay less for insurance coverage against theft and damage to their personal belongings.

4. Some utilities may be covered in your rent. Some residential buildings factor the cost of basic utilities right into monthly rental fees. Although this varies from one location to another, utilities like water, electricity, natural gas, garbage and recycling disposal, and even TV and internet services may be included. This can make budgeting easier.

5. Renting gives you more flexibility to deal with major life changes. If you own a house and something unexpected occurs, like losing your job, having to relocate for work or a family member getting sick, then selling your home can involve a lot of logistics.

Renters have much more flexibility and can adapt to unexpected life circumstances. All you need to do is give your landlord the proper amount of notice (typically 60 days if you pay rent monthly and 28 days if you have a short-term rental arrangement).

6. You can potentially reclaim part of your rent if you work from home. More people than ever before have been working remotely due to the pandemic. While working from home does have its challenges, there are also numerous perks. One of them is the ability to recover some of your rental fees by claiming part of your home as a work space on your taxes.

There are certain criteria that need to be met in order to deduct part of your living space as business expenses on your taxes. If you qualify though, it can help save you a decent amount of money every year.

7. You can invest for your future in other ways than building home equity. Home ownership is just one wealth-building strategy and some economists and financial advisers would actually point to other ways you’d be better off investing.

Investing in the stock market and mutual funds can pay off if you invest wisely. According to the Canadian Real Estate Association, the average annual gain on house prices was 5.5% over the last 30 years, while the average return from stocks was 8.5%.

Investing in a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) is another financial planning option. Some employers offer plans that will match your RRSP contributions, which is smart option if provided.

3 more important things to know about home ownership

We’ve shared a few reasons why renting may be more ideal for someone than owning a home. But, here are a few more important things to know about buying a home:

1. Buying a home is one of the most stressful life decisions Canadians have to make. This isn’t a surprise, considering a home purchase is the biggest financial commitment homeowners will ever make.

According to a Mortgage Professionals Canada study that surveyed 1,991 people, here are the top five things that stress Canadians out the most:

  1. Moving to a new city for a job.
  2. Buying a home.
  3. Having a baby.
  4. Getting married.
  5. Choosing a post-secondary school.

2. Ottawa’s booming housing market makes buying more expensive

Ottawa’s housing market has recovered dramatically after being slowed down by the impact of the coronavirus. Buying a home in Ottawa right now will cost more as a result. RE/MAX’s Fall Market Outlook Report shows that home prices in Ottawa are up 14% compared to last year, with further price growth expected.

Low housing inventory has created bidding wars that routinely result in offers as much as $100,000 over the asking price.

3. Building home equity takes time. After you buy a house, the return on investment can be slow. Because you own so little of your home in the early years after buying, it takes longer to build up your equity.

Building equity in your home can take even longer if you made down payment less than the recommended 20% of the price of the home (which would also require you to get monthly mortgage loan insurance).

Is renting in Ottawa right for you?

The bottom line is that for many young adults, renting in Ottawa is simply a better fit for their lifestyle and financial needs.

The appeal of living in one of Ottawa’s most desirable neighbourhoods is what makes Westboro Connection and Hintonburg Connection such in-demand modern apartment destinations.

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