Tag Archives: home ownership

Renting vs Buying Property while living abroad: Which is best for Financial Independence?

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By Emily Roberts

For the Financial Independence Hub

Financial independence means different things to different people. It has an impact on your life planning and whether renting is preferred over buying property. If you’re planning to go abroad and live elsewhere like continental Europe, Eastern Europe, or south-east Asia, then plans may be different again.

In this article, we look at whether renting is better than buying when you’re financially independent (or working towards it).

What Does Financial Independence mean to You?

Financial independence is possible at various levels. People refer to it by different names including Barista FIRE, CoastFIRE, FI, and others.

One approach is to reach a modest level of financial independence to provide a minimal income from investments, and to let them grow from their current level for a decade or longer while working an easier, low-paid job. Another approach is to wait until you have enough and then retire, but with the occasional freelance or consulting gig too.

Financial independence doesn’t necessarily mean retirement, which generally speaking refers to stopping working as a primary source of income. Different strokes for different folks.

Advantages of Renting

When still working, renting comes out of your paycheck and reduces what you can invest for future financial independence. Some people decide to live and work abroad to reduce their living expenses, to allow them to save faster.

Renting in the US

Americans can rent places Stateside but have to be careful of the long-term leases and associated fees along with any restrictions on tenants.

Depending on the city, renting has become quite expensive, causing some to look abroad.

Renting Abroad

Renting abroad can save you considerable money compared to back home.

For instance, PropertyGuru provides rooms for rent in Kuching, Malaysia. They have rooms for under $100 a month, studios for greater privacy, and larger multi-bedroom apartments in newly constructed buildings too. Their team can locate suitable rental accommodation close to major facilities and transport links, so whether you’re working there, planning to retire, or just on vacation, they can find something suitable.

Advantages of Buying

Purchasing real estate is something that appeals to many people. When they don’t like the idea of not owning where they live, then they lean far more towards buying.

Owning property domestically is possible when the prices are affordable. Unfortunately, cities with the most jobs typically also enjoy robust real estate markets with high prices to match. Sinking most of the next egg into a home makes retirement difficult. The ongoing ownership costs aren’t cheap either. Continue Reading…

36% of non-Home-Owners under 40 giving up on buying first home, but others still plan to buy, RBC poll finds

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By Amit Sahasrabudhe, Vice-President, Home Equity Financing, RBC

(Sponsor Content)

The road to home ownership isn’t always an easy one and the pandemic has made it even more complex, bringing new challenges and opportunities for prospective homebuyers. For some, lifestyle changes have created opportunities for increased savings. Others find themselves priced out of the housing market.

RBC conducts an annual Spring Housing Poll to learn more about Canadians’ attitudes around home buying and the housing market. This year’s results show that despite some Canadians – especially non-homeowners under 40 – reporting they have given up on the dream of home ownership, there has been an increase in those who say they’re likely to buy in the next two years.

Even amidst an increasingly expensive housing market, most Canadians feel that housing continues to be a good investment and that it is still better to buy than rent.

Should you buy now or buy later?

The first step in knowing whether it is the right time to buy is understanding how much you can realistically afford. This includes having a full picture of your current financial situation and how it may change in the future. It is also important to consider external factors like the overall housing market and economy, as they can also have a big impact on your ability to purchase a home.

In fact, our research found that many Canadians are planning to wait to purchase a home because of the state of the economy, concerns about their job security and affordability, especially in hot housing markets. For others, historically low interest rates and the fear that housing market will become increasingly unaffordable are motivating the decision to purchase a home sooner.

While Canadians now have a lot more factors to consider when buying a home, they don’t have to embark on this journey alone. Buying a home is one of the most important decisions you will ever make and there’s no substitute for doing your research and receiving expert advice on how to fit your home purchase into your overall financial plan. RBC Mortgage Specialists are available to help you with your home buying journey from start to finish, and appointments can be booked virtually, by phone or in-branch.

Saving for a down payment

When it comes to purchasing a home, saving for a down payment can often be the biggest barrier to entry. While everyone’s financial situation is different, some Canadians have taken advantage of reduced spending during the last year to build up their savings. Our research found that most Canadians who are likely to buy in the next two years are setting aside monthly savings to put towards purchasing a home, saving an average of $789 each month. Continue Reading…

7 steps to downsizing your Home: a checklist

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Achieving financial independence often comes with dreams of a big house on a quiet cul-de-sac with plentiful space and bedrooms for the family. But during a worldwide pandemic, many homeowners have sought to simplify their life and downsize their primary residence.

To help demonstrate what downsizing may look like, we asked homebuilders and homeowners about the steps they would recommend taking if they were to downsize a home.

Here are seven steps to downsizing your home:

  • Right-Sizing
  • Accessibility
  • What Items Do You Use to Support Your Habits?
  • Do The Hard Things
  • Have a Financial Plan
  • Don’t Get Sentimental
  • Keep Things Only if They Bring You Joy

“Right-Sizing”

At Cullum Homes, instead of downsizing, we call it “right-sizing”! We have been designing and building lock-and-leave luxury homes in this specialized niche market for many years. Steps we would recommend include (1) free yourself from a large lot, pool, landscaping, etc. and the endless expense, upkeep, and maintenance they require, (2) consider a private, gated community with resort access and/or amenities that are maintained by someone else, and (3) before making the move or having a new home built, give careful consideration to the rooms and spaces you want now and might need or want in the future. Don’t become so focused on cutting space that rooms become unworkable. We have actually had clients that cut out too much space, only to return and have us add on later, or build them another larger home! — Rod Cullum, Cullum Homes

Accessibility

As a company that specializes in accessibility lifts, many of our customers are either looking to downsize or reduce the impact of mobility challenges in their homes. Many of our customers find that adding accessibility to their existing home allows them to remain comfortable and surrounded by the things that are important to them. This is often the easiest way to simplify your life. If you do need to downsize, a stair lift can make an in-law suite readily accessible. — JJ Hepp, Arrow Lift Stair Lifts

What items do you use to support your habits?

Having recently downsized our home, we took stock of how we spend our time and what we use in support of our habits. This made donating and discarding unwanted items a lot easier. We also looked ahead at the space we were moving into and how our current furniture and other items would help make this smaller space as efficient as possible. In hindsight, we spend less time maintaining our space and have more free time and a better quality of life. — Steven Brown, DP Electric Inc

Do the hard things

The reality of downsizing a home is that homeowners have less storage space and less living space. Getting rid of things is hard. Doing Goodwill drop-offs or posting items on OfferUp means saying goodbye to lots of memories. But, making the hard decision to part ways with items opens up an opportunity to say hello to a new lifestyle with reduced upkeep and increased savings. Do the hard things that come with downsizing, and your lifestyle will benefit as a result. — Brett Farmiloe, Real Estate SEO Company

Have a Financial Plan

Whenever downsizing is brought to the table, it can be a phenomenal experience. It is quite surprising to learn how you can function on a lean basis, void of clutter and unnecessary items. Continue Reading…

First-time Homeowner? Follow these 3 tips for a smooth financial transition

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By Gary Bordeaux

Special to the Financial Independence Hub

Becoming a homeowner is an exciting, pivotal and sometimes overwhelming time in a person’s life. A home is likely the largest investment you’ll ever make, so it’s important to go into it with a clear head and a solid (yet still flexible) plan. Even though everyone’s experience will be different, there are still some things that remain similar for everyone adjusting to life as a homeowner. If you’re embarking on this journey and could use some direction, keep reading. Here are three tips to keep in mind that will ensure this transitional time is the best it can be.

1.) Make essential upgrades that will improve functionality and save money

When you purchase a home, you’re also purchasing any essential items that might come with it, such as appliances, water heaters or even a home security system. Since all of these are major parts of a home, pay attention to their condition regardless of what the inspection report says.

It’s not uncommon for new homeowners to have to spend money right off the bat on either repairing or replacing these types of items. This adds up, so pay attention to where (and how) you’re spending your money. So, while it might be tempting to go on shopping sprees for new furniture and home decor, try to wait it out until you have a grasp of how everything is working. There’s not much worse than being short on funds when you need them most!

For instance, maybe your new home came with an older water heater that doesn’t heat efficiently. Maybe it’s too small to meet your needs, or maybe it just doesn’t work consistently. A simple call to a firm like this water heater company in Thousand Oaks can determine the best course of action to take to ensure your hot water situation improves quickly. A more efficient water heater also means more money saved, so you can go ahead and buy that new piece of art for your new mantel.

2.) Prioritize Convenience

When you purchase a home, you might have certain things in mind that you’d like to do, such as installing new flooring or painting throughout. Both can be costly and time consuming, and both have one thing in common. They’re much easier to do when your new home is empty, before you’re actually living in it. This is a situation where it’s important to prioritize what will make your life easier, especially when the projects are inevitable. As you’ll quickly figure out, you will have plenty of decisions to make along the way and some will carry more weight than others.

3.) Get a Home Maintenance Plan together (and stick to it)

As a new homeowner, you will quickly realize how there is always something that needs to be done. If you don’t set up some sort of schedule or guide to manage to-dos, your new adventure can quickly become a huge source of stress. Since nobody needs that, make sure you don’t skip this part. Breaking it down seasonally is a great place to start, also including recurring tasks such as cleaning and landscaping. Continue Reading…

BBC StoryWorks #3: The case for locking in to Fixed-rate Mortgages at today’s ultra-low interest rates

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The third article of six planned to appear on the BBC StoryWorks website in Canada has now been published. You can find it by clicking on the highlighted headline here: Embracing the Fixed Rate Mortgage.

As explained in the first instalment, the articles look at Covid-19 and the impact on the real estate and mortgage industry. The articles appear weekly and run into November.  The last three articles will look at the case for locking the investing experience following Covid, optimum strategies going forward and close with retirement strategies in the age of Covid.

In the second article of the series we made the case for why you might want to go with a variable rate mortgage and keep your interest costs as low as possible at today’s historically rock-bottom rates. In this article — written with my input and sponsored by TD Bank — we take the opposite view and present the argument why you might consider locking in to the safety and security of a 5-year fixed rate mortgage.

After all, there’s a lot more room for rates to rise than fall from here, and staying variable may be especially stressful for those with larger mortgages. True, you may be able to save a few basis points in interest charges by staying short but at what cost in anxiety and sleepless nights?

Variable mortgage rates remain a tad lower than fixed but is it worth taking a gamble with variable to get the absolute lowest rate or is it better to choose the safety and security of a fixed rate mortgage? Today’s record low 5-year fixed rates has made Lethbridge-based fee-only financial planner Robb Engen (and regular Hub contributor) rethink his past strategy of staying variable.  He points out any upside with variable rates is largely gone now as the prime rate is likely as low as it’s going to get.

Both variable and fixed rates may be under 2% these days

“Fixed and variable mortgage interest rates [for the same term] are pretty comparable these days,” says fee-only financial planner Jason Heath, managing director of Toronto-based Objective Financial Partners.
Continue Reading…