After spending a month on my own in Paris, in the smallest but most stylish studio apartment I’ve ever been in in my whole life, I decided that I would really love to live in a studio apartment. Permanently. In Edmonton.
What I want is a small, maybe 500 ft2 space that forces me to be creative, live without a lot of stuff, and takes the least amount to clean. What I can get in Edmonton, however, is 800-1000 ft2 of luxury, look-at-me, please-put-your-leather-couch-and-matching-ottoman-here.
Nevertheless, I did fall in love with one centrally located loft that boasts exposed brick walls and wood-beam ceilings. It’s on the smaller end at 800 ft2, and I was in the mood to compromise so I decided that the extra room was just fine. I quickly began to stitch together an awesome fantasy life where I am a super trendy twenty-something in an upscale loft downtown. I could put art on the walls and have my friends over for cocktails at my bar table and I could live into my thirties like the down-to-earth, minimalist-but-still-fashionable missing character from Sex & the City.
It was going to be AWESOME.
So, committed to being single and sexy for at least the next 5 years, I decided maybe I would like to buy this loft. What did I need my grandmother’s 4 bedroom house for? I’m going to be a jet-setting professional that can only call a place home if it is within 10 metres of at least 5 different restaurants.
Of course this glorious dream came to a screeching halt when I was reminded that I live in EDMONTON, city of unjustifiablyexpensivehomes. Only here would a loft — yes, 800 ft, no distinct bedrooms, one bathroom, four-walled-thing — cost $300,000.
Should I even begin to point out the problems with this? After my dreams of home ownership were crushed, I decided I could probably console myself by renting one of the lofts instead of purchasing it. Except rent is about $1,000/mo, which I thought was interesting since it really shows the difference between owning and renting — namely why renting is better. Now, many of my friends hate when I say that, but it’s because they were duped into the ridiculous idea that buying a house is always an “investment” and renting is always “throwing money away”. STFUDF, renting for me is awesome because when compared to home ownership of the $300K loft, it looks like this:
Ok, so I have a pretty good deal not having to pay utilities or internet, but $650/mo is NOT the cheapest rent in my city — it’s completely reasonable to find a room that costs as much as $200 less than that if you wanted!
So, I did my math assuming a 20% down-payment on the loft of $60,000 plus an additional $6,000 in closing costs. The condo fees are $400/mo and the property taxes are $1513 per year as written on the sales listing. By renting instead of owning, I have $871 extra to play with each month. Now, imagine I saved up that 20% down-payment + closing costs, and instead of buying the loft, invested the cash and contributed my extra $871 each month. After 5 years, even a simple savings account at 2% produces a better return than what I would build up in equity in the home. Because many would argue the case for homes appreciating in value (as if a downtown loft has any appreciation value.. HA!), I re-did the calculation assuming an annual appreciation of 3%, and it’s still less than investing at 2%. Would I ever allow so much money earn 2% though? Of course not. I’d dump all that cash in riskier investments, and here assuming a very conservative return of only 5% was see that after 5 years renting KILLS owning:
For me, renting is not throwing money away — it’s an easy way to make $20,000.
Now I understand the main problem here is I want a $300,000 home. Maybe if I set my sights on some dumb townhouse in suburbia the numbers would flip, but for now renting is the best decision if I want to stay downtown… which is terrible, because I really want that loft.