Buying vs. Renting? Can I afford to buy?
Did you know? The CMHC (Canadian Mortgage and Housing Corporation) estimates that 40% of renters have the financial capacity to buy a home.
New or renovated apartments and condominiums can offer all the luxurious amenities you might want in a home: a dishwasher, gas fireplace, panoramic view, secure monitored entranceways, new carpet or hardwood and even a concierge. If you are extremely lucky you may get a deal - the building may be desperate to find a tenant or may have some minor flaw that doesn't bother you. Typically, however, you will end up paying for these amenities... sometimes a minimum of $200-$300 extra per month compared to a similar but more modest lodging.
How much you want to spend on rent is a personal decision, although it is good to consider some basic guidelines. Financial planners usually suggest that people spend no more than 25% of their gross income on rent. If, for example, you earn $1600 per month you should spend a maximum of $400 on rent. If you earn $2400 per month you should spend no more than $600. (If you live in a large city you will probably already be at or above the 25% figure.) We can all stretch our budgets somewhat by cutting down on extras like clothing or restaurant meals but people tend to fall back into habitual spending patterns.
Don't forget your monthly base of expenses. Telephone, transportation (car insurance and gasoline or fare for public transportation) and food are constants. You may also have to pay for cable, heat, hot water and electricity depending on the building you choose. It's a good idea to check with your local utilities for a list of previous heating and electric costs for the property. Many older buildings lack proper insulation and a quick background check can save you from exorbitant heating bills. Don't forget one of your most important basic expenses:savings. Be sure your budget allows for regular "payments" to your investments.