Hi Guys,
Here is my situation
I am planning to move to a 2BR condo and planning to stay in Montreal for next 3 years time and after that move out of Montreal.Basically I have two options

Option 1: Move to a 2BR condo and stay on rent baisis
Pros : No financial debt headache /No mortgage.
No obligation ..free to move out whenever decide to move out of Montreal

Cons: After checking different 2BR condos (I need to stay in a specific area which is close to my office) I calculated I need to spend 1000 -1100 CDN per month.That means over a period of next 3 years I need to spend CDN 36,000

Option 2: Buy a 2BR condo which will result mortgage around CDN 1100 per month and after 3 years sell it out

Pros :Even I am able to sale the condo at break even(say I am buying at around CDN 160k and selling it at a same price)still I can stay in my own condo at free of cost for next 3 years

Cons: Financial debt
Might face problem in selling the house at a reasonable price

After spaeking with my friends I am getting different ideas.Some of them are telling it might not be a good idea to buy for a short period of time.Other friends are telling me by buying a condo chance of loss is less because property value won't go down that much and any selling value more than CDN 124K(160,000 - 36,000)I will be gainer

I need your help/advice on this or if someone can share his/her own experience

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ani

Another option:
Buy a condo and make sure that you can rent it out(some condo associations are fussy) if necessary.

Now after 3 yrs you have a bit of equity already built into the condo(if you do not refinance). If the market is down...Rent it out at that point and the tenant keeps building your equity. You are thus building up your assets with someone elses $. You will be in debt but I consider this kind of debt a good one. Also its collateral you can use to buy your next house.
Interest rates are going up but you could lock the rates.

If the market is on the upswing...you sell and make a profit.

There are realestate guys here who would probably know more about this than I do. Maybe they can warn of the cons. Its not risk free but depending on how much homework you do, you can work it to your advantage.

I'm actually looking to buy a condo for investment purposes in TO or Montreal soon.

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http://www.servicedomino.com

Jake 3D,
I really appreciate your quick reply
I won't say thank you again because before I moved to Montreal I kept getting valuable advice/help from you



Pramod Chopra/Other CD members
Any other opinion will be appreciated

regards

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ani

Keep this in mind too

http://moneycentral.msn.com/content/Banking/Homebuyingguide/P72655.asp

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We will find a way or we will make one

HI Ani70,

More often than not we have found that a person who buys comes out winner in the long run than a person who rents. However, it also depends on the individual's situation, the type of property being bought, the location, down payment and the time frame for which the property is being bought and the difference in monthly outflow amount between renting and owning. The author of the best seller 'The Automatic Millionaire' has also strongly advocated buying a house rather than renting, but as I said earlier it depends on other factors as well.

Let us take your situation.

Even though I do not know how much is the value of the condo you are going to buy and what down payment you are going to make ( because if you put less than 25% down payment you have to take into consideration of the CMHC premium as well) I am considering that you are looking for a mortgage of around $160,000. Suppose you get that mortgage at 4.65% for a 3-year term, your monthly mortgage payments would be $900 per month. On top of that you have to pay the property tax and the condo fee as well. Both of these items could cost you anywhere between $500 to $600 per month. That means that your monthly outgo on the housing would be around $1500 per month comparing to a rent of $1000 - $1100.

Now consider that you rent and religiously put the savings of this $400- $500 per month to a conservative non registered investment giving you around 6% p.a. you would be able to save around $16,000 to $20,000 after tax in 3 years. But if you put this amount in your RRSP and have a tax savings of around 30% and invest the refund again into RRSP ( I know it would be more but I am just taking a conservative approach and presuming that you have not maxed out your RRSP) you would be able to save around $18,000 to $25,000 in your retirement funds.

Now consider the case if you are going to buy the condo and are paying $900 per month as the P&I for the mortgage. In 3 years time you would pay a total of $32,400 in P&I and would be able to build an equity of app. $11,000. Now let us assume that the total appreciation of 10% in the value of the condo in 3 years and when you sell you may have to pay 4% to 5% as selling cost, which could give you an appreciation of around 6% which could mean another app. $10,000. To this you can add $3,600 (which is the difference in out flow of rent vs mortgage for 3 years i.e. $36,000 - $ 32,400) which means a total savings of around $24,600 over 3 years.

You will notice that with these assumptions renting v/s owning is coming at par for you considering the low time frame for owning. However, if your time span were to increase you would definitely be a gainer in owning than in renting. Moreover, as Jake3D has suggested that you could rent it out (of course it depends on the location) and then you would definitely be a winner.

Please note that these assumptions are purely based on my experience of Toronto Market and I do not have any idea about the condo market in Montreal and the appreciation and or depreciation in real estate value there can change these projections significantly. None the less, these would give you a fair idea of how to do the calculations in your situation.

I hope it would help. Should you have any question, you can email me personally.

Regards,

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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada

HI Ani,

I have replied to your PM. Please see your mail box.

Thanks

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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada

Hi Pramod Bhai,
I sent you a PM with some more queries
PM me at your free time

thanks

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ani