Apartment VS condo?

Every day, several inquiries are made to our leasing agents, regarding advertisements offering condos, with the support of financial institutions. In response, we’ve prepared this document to inform you of the advantages of renting, rather than purchasing a condo as an investment for your future.

A decent 1-bdrm condo around our area presently sells for $239,000.00, with a minimum down payment of 5% or $11,950.00. With a 5% down payment most financial institutions require CMHC approval, and this process will cost you $6,250.00 which is usually added on to the mortgage for a total of $233,300.00. Mortgage rates today are 5½% for a five year term, which will leave you with monthly payments of $1433.00 for 20 years, providing the rate is not increased in five years.

Initial fees to be paid upon purchase are:

1. Legal fees including services at $800.00, and a transfer tax of $1,830.00, for a total of $2,630.00
2. Mortgage application fee of $75.00
3. Cost of inspection of the property at $500.00
4. Cost of appliances new or used
5. Property tax adjustments

Therefore your total initial investment would be between $4,000.00 to $6,000.00.

And once the home is purchased, the monthly expenses attributed to owning the property start. Property taxes, insurance and condo fees must be paid.

Mortgage payment	$1433.00
Property tax	$250.00
Condo fees	$200.00
Insurance	$75.00
Extra heat cost	* $70.00
Total Monthly Expenses	$ 2,028,00
Cost of Renting a 1-bdrm (Bayside Lakeshore)	- $1150.00
Difference	$878.00

* The cost of heating and hot water in a condo is not included. This will cost $75 per month

What does an extra $878.00 a month saved by renting mean to you? For some it can mean a new car, vacation or any variety of monthly expenditures.

Let us look at an investment package. By investing $878.00 a month earning 6% interest, over a period of 20 years you will have a personal worth of $322,000.00. In comparison, your $239,000.00 condo will not increase in value to reach these levels of return.

If you sell your condo after 2 years because of financial difficulty, illness, transfer, marriage breakdown, death or loss of employment, to the astonishment of many it will cost $1,500.00 out of pocket to unload your property. Although your mortgage balance may be $224,000.00, if you receive $250,000.00 for your condo, it will cost you $15,000.00 in real estate fees, plus $1000.00 closing expenses to sell. Therefore your total cost of ownership versus renting over two years will exceed $25,000.00, explained as follows.

Initial Investment	$17,000.00
Monthly extra expenses ($878.00 x 24 months)	$21,100.00
	$38,100.00
Minus: Cash you recoup upon sale (234k – 224k)	10,000.00
Net	$28,000.00

The point we want to emphasize is that purchasing rather than renting, is not always a sound investment decision when you look at all the facts.