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As you can see in the image below, if you have any uncertainties about how or where you want to live, then renting is the way to go. Buying locks you into a deal that you may not want anymore in 3 years, whereas renting is more temporary with a "backdoor" option.

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The website is an article by Rob Carrick, and it is really shows how the decision process should be made. It is basically a case study where options are broken down and you can see dollar amounts for each case, taking into account all the expenses and rates involved when purchasing a house and making payments on it, compared to renting a place and only making simple steady payments.

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Every year, Frank Tristani assigns his McMaster University finance students the task of showing whether renting or buying a home makes you wealthier.

As Mr. Tristani scores the results, owning never wins. "Over six years, no one has been able to substantiate buying as creating more wealth over the long term," he told me in an e-mail.

By necessity, more people are considering renting, at least temporarily, as an alternative to buying in a housing market where sales have slowed but prices have for the most part continued to edge higher.

There will never be a definitive answer to the question of how owning a home compares to lifelong renting, but we can at least dismiss the old "renting is financial idiocy" view as Flat Earth thinking. An analysis supplied by Mr. Tristani suggests a renter with steely savings discipline could actually end up wealthier than a homeowner.

Before we delve into the numbers, let's look at Mr. Tristani's background. The 60-year-old spent more than 34 years in the banking sector, managing branches and working in the wealth management and commercial credit areas.

These days, he teaches courses at McMaster on corporate finance for business and accounting students. This is a man who knows his way around a balance sheet and, yes, he owns a home himself.

The buy-versus-rent assignment given to his students is all about teaching them to produce the sort of unbiased, forward-looking financial analysis used in the corporate world. This analysis is about numbers, not lifestyle.

Mr. Tristani's question to his students is simple: Would you be financially better off buying a home today with a 25-per-cent down payment or renting for the same 25 years you'll take to pay off your mortgage? Various cost factors had to be identified as influencing the decision.

Mr. Tristani's own take on this question starts with a $400,000 house in Hamilton, where McMaster is based, bought today with a $100,000 down payment. At a constant mortgage rate of 3.99 per cent over 25 years, total monthly payments would be close to $473,000.

Next, he added maintenance costs set at 4 per cent of the market value of the home per year. This includes utilities, property taxes, maintenance and "accruals," or lump sums to cover periodic major renovations and upkeep. The total amount for maintenance over the 25 years is $583,348.

Average annual price appreciation for the house was set at the inflation rate, which Mr. Tristani pegged at 3 per cent. The home is worth $837,511 after 25 years, which is close to $319,000 less than the combination of down payment plus mortgage and maintenance costs.

The cost of renting was set at $1,500 per month, which amounts to $541,134 over 25 years if you assume annual increases of 1.5 per cent, plus $131,253 to cover utilities and insurance. On the plus side for renting is an investment portfolio worth $936,789, which is what you'd end up with if you invested the $100,000 down payment plus continuing mortgage and maintenance amounts and made an average 6 per cent return.

As Mr. Tristani calculates it, your investments end up worth better than $264,000 more than your rental payments.

There's plenty to argue about here. Six per cent returns? Mr. Tristani said he actually discounted the average 9-per-cent historical total return from bank stocks (price gains plus dividends) held over the long term to get this number.

A mortgage rate of 3.99 per cent? It's high by today's standards, but a bargain in a historical context.

Be careful arguing the maintenance costs, though. They're high, but Mr. Tristani said they need to be if you want to get top price for your home when you sell.

A basic argument for owning is based on the idea that paying a mortgage is a forced savings plan. As a renter, you may not be disciplined enough to invest the money you're saving as a result of not owning a home.

Mr. Tristani, ever the contrarian, says homeowners are demonstrably more undisciplined than renters. Just think about all the people who are using home equity lines of credit to keep up their lifestyle.

Every year, Mr. Tristani's students start out trying to make a case for buying instead of renting, only to find their assumptions challenged.

Don't call Mr. Tristani a house basher, though.

"The whole point of this exercise isn't to say whether buying or renting is better," he said. "I'm trying to get people to think like a finance person."
For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).

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corporate finance for business and accounting students

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Would you be better off financially renting or buying a home?

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Every year, Frank Tristani assigns his McMaster University finance students the task of showing whether renting or buying a home makes you wealthier. As Mr. Tristani scores the results, owning never wins. "Over six years, no one has been able to substantiate buying as creating more wealth over the long term," he told me in an e-mail.

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The graphic below proves that the residential market in Canada is a secure market, that will in most cases always be climbing.

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This video goes into full detail about the pros and cons of each renting and buying. It gives insight into many different statistics when considering weather you want to buy or rent. I found it interesting when he talks about adding value to your home to insure you don't lose money when selling, which I think would be a very important aspect to consider when owning a home.

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Chris Graeve - Renting vs Buying a house

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This video is important and relative to viewers of this page because it is mainly directed at young, first time buyers. it outlines things that a young interested individual like myself, would want from their first place. A condo,can be purchased and called your own and as the video says, "home ownership is the greatest form of freedom". It also states how the residential market is one of the safest markets with low chance of ever having major losses.

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Should young adults buy a condo as a first home? with David Fleming and Rob Carrick

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David Fleming and Rob Carrick discuss the pros and cons of buying a condo: * Should you invest in a condo? * What are the benefits? * What are some concerns?

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This image shows the percentage of income Canadian Citizens are paying on their monthly rent. It also shows the highest and lowest amounts payed on rent. 23.4% of BC citizens pay 50% of their income on rent!

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This website outlines why it is better to Rent a home instead of buying. It gives some interesting stats about additional costs involved in buying a home that make renting a better option. It basically describes how much work and money is involved when purchasing a home, that you will be left wanting to rent by the end.

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Does it make more sense to buy or rent a home from an investment perspective? It's a question I get asked more than any other. The answer, in an era of historically low interest rates and perpetually rising real estate values, appears to be obvious: buy.

Just ask any real estate agent and they'll tell you, "Don't pay your landlord's mortgage for him," or "Build equity for yourself instead of flushing your money down the toilet," and our favourite, "There has never been a better time to buy."

It all sounds pretty convincing, but it's wrong. Unless you need the security blanket of owning your home, it is nearly always a better financial move from an investing standpoint to rent rather than buy. The reason: People rarely consider three major costs of owning a home.
1. The round-trip costs of buying and selling
The largest expense when buying a home is the land transfer tax. In most jurisdictions, this can amount to at least 1.5% of the purchase price. In the Greater Toronto Area, it's closer to 4%, which comes close to the rent you would pay on a similar residence for an entire year. And, keep in mind, this is paid in after-tax dollars.

When you sell your house, you will also pay about 5% in commissions. Throw in moving costs and legal expenses, and the total cost of buying and selling a home approaches 10% of the purchase price.

[np-related /]

If you buy a home for $800,000 and sell it five years later for an impressive $950,000, your net profit (excluding the hefty annual costs discussed below) is about $80,000 - or a compounded annual return of a paltry 1.6%. That's not a typo. True, this calculation doesn't figure in the so-called benefit of leverage, but we'll get to that in a minute.
2. The operating costs of ownership
The largest cost of ownership is invisible. It's the opportunity cost of not having invested your downpayment somewhere else. As the above point demonstrates, you don't have to take a lot of risks to outperform the equity appreciation of your home, even in most bull markets.

The other costs of home ownership aren't invisible at all. Property taxes, mortgage interest, maintenance and a variety of other miscellaneous expenses quickly add up. If you've ever had a leaky roof, frozen pipes, a pool to take care of, or a predilection for home improvements, you know this to be true.

Of course, homeowners aren't on the hook for paying rent, but the operating costs generally far outpace the rent that would apply to the same residence.
3. The impact of a mortgage
It is generally assumed that buying a home means taking out a mortgage, especially with interest rates at historic lows. Mortgages used to be a vehicle that homebuyers used to buy an asset well beyond their means. The goal was to pay it off over 20 or 25 years, just in time for retirement, when the home they lived in would become their physical nest egg.

This has morphed over time to the point where buyers access the maximum amount of leverage available to them at purchase and take the longest possible amortization period available. They enter into mortgages knowing that their monthly payment is close to the maximum they can afford (assuming they stay employed and won't have any costly unexpected events), confident that if they ever run out of money, they can just extract more equity from the ever-increasing value of their home.

This isn't preparing for retirement. This is preparing for job interviews in your seventies when you should be enjoying cocktails after a round of golf.

If you would like to run some of the numbers comparing buying vs. renting for yourself, click here for an excellent online Excel template that is geared specifically to Canadian homebuyers. The New York Times has also published a very detailed interactive online calculator that may be useful.

The bottom line is that using leverage to buy a home presumes the value of real estate will always go up. Historically, the value of residential real estate has increased more or less in lockstep with inflation, meaning that the buying power of your equity will be the same 20 years after you buy a home as when you bought it.

The same people who think buying a home with 15% down is a sound investment would never dream of applying 600% leverage on any other investment. Most conservative investors, for whom capital preservation is the primary objective, eschew any leverage at all in their investments because leverage works both ways: It magnifies gains, but magnifies losses as well.

In the case of an 85% mortgage, it is imperative to understand that a 15% decline in the value of the home results in a 100% loss of the equity forming the downpayment. The vast majority of your mortgage payments in the first five years is interest on your debt. If you sell your house after that time following a 15% market correction, you end up with nothing after you pay down your outstanding mortgage principal.

If you try to refinance your mortgage in that scenario, you will have to "re-up" on your equity, assuming you can get a new mortgage at all. This is a tame version of what transpired in the U.S. in 2007-08. It is not fantasy; it can happen here and it will happen here.

It's just a matter of time.
David Kaufman is the president of Westcourt Capital Corp., a portfolio manager specializing in the construction and management of investment portfolios using traditional and alternative asset classes and investment strategies. drk@ westcourtcapital.com

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Does it make more sense to buy or rent a home from an investment perspective? It's a question I get asked more than any other. The answer, in an era of historically low interest rates and perpetually rising real estate values, appears to be obvious: buy.

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This video outlines what things you need to take into account when looking to rent an apartment. There are some very helpful tips that you might not of thought about and after watching, you'll be set on what you need to do before renting.

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This website shows the 5 simple, yet best factors of owning your own home. It is a quick, informative website,  and everyone can agree that these basic advantages of owning a home are everything that young interested people want from their home.  People are looking for something that they can call their own, and do with it what they please, knowing that it is an asset that will likely make them money someday, and also save them money in the long run.

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This presintation will outline the advantages of buying a home, renting a home, and deciding between the two. This is intended to inform viewrs of the process they should go through before jumping to conclusions on weather they want to buy or rent.

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By: Thomas Wiarda and Brayden Carder