Every day, several inquiries are made to our resident managers, regarding advertisements offering houses, mini homes or condos, with the support of financial institutions.  In response, we've prepared this document to inform you of the advantages of renting, rather than purchasing a house as an investment for your future.

The Costs of Buying

    The average house in greater Moncton presently sells for $90,000.00, with a minimum down payment of 5% or $4,500.00.  With a 5% down payment most financial institutions require CMHC approval, and this process will cost you $3,200.00 which is usually added on to the mortgage for a total of $88,700.00.   Mortgage rates today are 6½% for a five year term, which will leave you with monthly payments of $656.82 for 20 years, providing the rate is not increased in five years.  Most anxious new buyers, stop here.  Let us look at the actual facts.

    Initial fees to be paid upon purchase are:

1. Legal fees including services at $575.00, dispersements at $200.00 and a transfer tax of $225.00, for a total of $1,000.00
2. Survey certificate of $500.00
3. Mortgage application fee of $75.00
4. Cost of appraisal at $200.00
5. Cost of appliances new or used
6. Property tax and water & sewage adjustments
7. Window coverings
8. Moving expenses
9. Hook-up fees for cable, telephone and power
10. Miscellaneous (lawnmower, shovels, rakes, paint & painting supplies, ladders, tools, etc...)

    Therefore your total initial investment would be between $9,000.00 to $10,000.00.

The Monthly Expenses of Buying

    And once the home is purchased, the monthly expenses attributed to owning the property start.  Civic Water & Sewer as well as other charges must be paid.  So do property taxes and insurance.  And then whether it's summer fall or winter, the property must be maintained.  Lawn mowing, fall cleanup & snow removal are all chores that need to be done around the home and in many cases some expensive equipment may need to be purchased to do this maintenance.  Then there's the maintenance that the house itself needs.  

   Either way, if the homeowner does these task themselves to save money but winds up with less free time; or pays someone else to do it for them, these are all costs that should be examined prior to buying.   Let’s break down the 8 essential monthly expenses:
 

  
    Some may argue that a mini home or condo may be a better purchase.  The fact is, fixed costs remain the same with the exception of items #1,  #2 and #3 of the monthly expenses previously mentioned.  The pad fees or condo fees paid monthly to the subdivision owner, make up the difference to match a mortgage payment on a $80,000.00 house, while the resale value of the mini home or condo is much less.  You’re paying a big price to have your house on their property for 20 years.

The Savings Can Add Up

    What does an extra $445.00 a month saved by renting mean to you?  For some it can mean a new car, vacation or any variety of monthly expenditures.

    Let us look at an investment package.  By investing $445.00 a month earning 8% interest, over a period of 20 years you will have a personal worth of $263,860.00.   Investing in mutual funds, which have averaged a 12% return over the past 10 years, will give you a personal worth of $444,620.00 in 20 years.  In comparison, your $90,000.00 house will not increase in value to reach these levels of return.

    The real estate market has barely held it’s value during resale over the past 10 years.  If you sell your house after 2 years because of financial difficulty,  illness, transfer, marriage breakdown, death or loss of employment, to the astonishment of many it will cost $1,500.00 out of pocket to unload your property.   Although your mortgage balance may be  $84,500.00, if you receive  $90,000.00 for your house, it will cost you $6,500.00 in real estate fees, plus  $700.00 closing expenses to sell.  Therefore your total cost of ownership versus renting over two years will exceed $20,000.00, explained as follows.
 
 

    The point I want to emphasize is that purchasing rather than renting, is not a sound investment decision when you look at all the facts.  By renting, your evenings and weekends are yours to do as you please.  No more shoveling snow, mowing the lawn, painting or completing house repairs.  You can spend your time enjoying your family and friends, while watching your investments grow.

Why Apartment Living Costs Less

    Some of you may ask why I’m in the property business if these costs are so high.  The answer is very simple.  Multiple units are cost efficient to build,  maximize land use and spreading operating cost over several units, rather than just one.  A responsible owner will re-invest his profits to maintain the highest standard and that is my personal philosophy.  As I focus on multiple units to provide the highest of service, I know I’m fulfilling a vital need to my residents and community.  This can be financially rewarding and provide a better way of life to those I serve.

    I hope the time spent on researching these facts concerning renting or buying a house as an investment, will provide you with the information you requested and assist you in making an informed decision based on facts, rather than incomplete or misleading publicity.

Yours truly,

Aris Vautour
President