Edit: Hi greaterfool.ca visitors! I’ve added a few more points of interest at the bottom of this post if you want a few more details about our condo and the sale.
The sale of our condo closed yesterday afternoon (late evening for us), and while we slept, we amassed a delightfully large bank balance.
That’s basically what we have left after paying off our mortgage and the other costs associated with selling (realtors fees, mortgage penalty, etc.). Sadly, it’s not all Ale & Whores from here on out. The cash has since been moved into our managed portfolio to be looked after by someone far more savvy and responsible than ourselves.
But the big question: did we make out like bandits by buying into the Vancouver real estate game? Or was purchasing a condo during the bubble instead of remaining renters our ruinous downfall? If all the real estate hype is to be believed, we must fall into one or the other of those camps, right?
Not so much. The actual result, after crunching the numbers, is decidedly underwhelming.
Real Estate purchase info is publicly available, so I’m not giving away anything particularly personal when I share that we purchased the condo in 2006 for $610,000 plus 5% GST ($640,500 total) and sold it in 2012 for $699,000. A gain of $58,500 over 6 years, or just over 9%. And if you want to get really silly, you could call it a gain of 45% on our original 20% down-payment. Not bad, right?
Not so fast.
Take away from that the selling costs we paid of realtor fees, repairs (new paint & floor), staging, legal fees, and we barely made away with $20,000 profit. And of course that doesn’t take into account all the costs of holding that investment: property taxes, condo fees (including a couple special assessments), and mortgage interest.
Putting all those numbers in, we spent about $1750/month “rent” (those holding costs, not including any mortgage principle repayment) for 55 months to make that $20,000.
What would renting for the same period have cost?
We know the mirror-image unit across the hall was charging just about $3000/month rent. They’ve got a few more square feet, and an amazing view of English Bay, so say ours would have rented for $2500/month. It would have cost us an extra $41,250 (plus the $20,000 we wouldn’t have made) to live in the same suite.
More realistically, we’d have stayed in our previous rental. Accounting for the maximum 4% annual rental increase, we would have averaged $1855/month in rent. At $100/month difference ($5500 over the 55 months we lived there) it’s almost enough to call it a wash.
So, the real question becomes, could we have done something different with our down payment of $130,540 to make $25,000 in 55 months? Maybe. The markets were absolute shit during those few years, so getting 5% a year wasn’t likely, but I think in the right investments it was probably possible.
So there you have it. Renting vs. Buying, in our particular situation, had no clear winner.
I did love our condo and really enjoyed both the space and the location. It was a great place for us to live, so I’m happy the numbers didn’t show it was a financially terrible idea to have done so.
But, considering renting isn’t bankrupting us either, I’m really enjoying the freedom and flexibility of non-ownership, and am in no hurry to buy property again any time soon.
Edited to add: Our condo spent three months on the market (after letting ourselves be talked into listing FAR too high by our delusional realtor) and sold for $36,000 below assessed value. It’s a penthouse unit in Vancouver’s Kitsilano neighbourhood, and we only sold because we’ve moved away from Canada. We bought what we could afford, with 20% down, and didn’t buy with any intention to flip. We had considered selling in November 2011, but ultimately decided we liked the unit and wanted to stay. In March 2012 the opportunity to move abroad came up, and renting wasn’t going to be cash-flow positive, so it was time to sell. We’re currently happy renters living in Oxford, UK.