What Is Your Home Worth?
If you want to start an argument on the Internet, or anywhere else, for that matter, start talking about the pros and cons of owning vs renting your home. It’s guaranteed to get people fired up on either side of the argument. Of course, depending on your level of debate, you might never get invited out with that group of friends again. There are points on both sides that make a lot of sense. Let’s take a look:
Renters claim it’s cheaper than owning, there’s less risk, they’re more mobile and aren’t tied to a specific location if they don’t want to be. Many say that houses are too expensive in our marketplace and are waiting for a crash to chop 50% off property values.
Owners say that real estate is an investment, and that renters are simply throwing away money by paying somebody else’s mortgage instead of their own. Depending on when they bought, they say they couldn’t rent what they have for less than their mortgage payment.
Renters don’t have direct costs such as maintenance, property taxes, or in some cases, utilities.
Owners have the freedom to do what they want, when they want to – they can paint, renovate, whatever – beholden to no one, in most cases.
I’m going to come right out and say it:
In our current marketplace, and especially in Langford or closer to Victoria, renting is probably cheaper and easier than owning, especially in the short term. If you are a disciplined renter, you can probably do quite well by investing the difference between your rent and the probable mortgage, taxes, and maintenance on a similar property in an RRSP or some other savings vehicle. But the problem is, most people aren’t disciplined enough.
Owners who view their home as a financial investment are somewhat short-sighted, in my opinion. Yes, historically, many people have done very well in real estate. I know plenty of people who’ve owned their home outright for decades, cashed out and bought a cheap condo to live out their retirement years, and banked the rest. But I believe that the crazy days of the beginning to middle of the last decade are long gone. It’s going to be some time before you can expect to buy, renovate, and flip a property for a huge profit in a short amount of time.
It’s one of the things that’s always bugged me about my profession (and one of the things, perhaps, that prevents it from being viewed as a profession), is this constant trumpeting about a home being a great ‘investment.’ As if your home is nothing but a walk-in ATM or some number in a portfolio at your broker’s office. People talk about the value of their home at dinner parties and around the water cooler – what it’s worth, how much the assessment went up or down this year, and so on.
What about the other meaning of value? What’s your home worth?
One of the reasons people hire me is to place a numeric value on their home. To estimate the amount that a buyer would be willing to pay given proper exposure and marketing, in a reasonable amount of time. But a home is much more than a number. A home you own is a place to put down roots. A place to start a family and watch them grow up in their own space. A place you feel secure and safe, that you are proud to call your own, proud to show off to friends and family. I’m not saying that you can’t be proud of a place you rent, or any of the other things mentioned above, but renters tell me all the time that they never really feel settled in many cases, and of course a landlord can sell to an owner-occupier, take possession him/herself, or even be foreclosed upon and you will have no say in the matter and will have to move.
A home’s value is in the memories, warmth, happiness and the family milestones which occur within its walls. It’s the photos on the walls, the junk in the garage, and the pencilled-in ‘growth charts’ on the wall in the kitchen.
Let’s stop talking about homes the same way we talk about a stock or bond or mutual fund. Let’s get back to basics where a home is a home first, and an investment a very distant second.
I was inspired to write this post by this video:
Have a great weekend, everyone.