For the last one hundred years, homeownership has almost been an expected part of life.

We’ve seen our parents and grandparents use homeownership as a safe and secure way to build wealth. In the last ten years, we’ve seen record real estate prices in Toronto–residential real estate increased 13.5% in 2020 alone. Not a bad investment if you’re able to get in.

Historically speaking, homeownership was something so many were aspiring to. It just made sense. Today? People are starting to ask questions.

Does this dream of homeownership at all costs still make sense? After all, with real estate prices skyrocketing in many 24/7 cities like Toronto, homeownership is further and further out of reach for many millennials. (In Toronto it takes an average of 21 years just to save up for the recommended 20% downpayment). Let’s dig into whether you should be pursuing homeownership.

There are two main benefits of homeownership

The first is having an equity position that can grow in value over time, and the second is security of tenancy.

Why it’s important to have an equity position in real estate

With an investment in real estate you are diversifying your portfolio and growing your net worth. Typically, real estate is seen as a good long term investment; if you can hold your real estate investment for five or more years it could turn out well for you due to appreciation. Plus, the housing market is generally said to be not too volatile, which makes real estate a safer investment than many other strategies.

Plus, many think that renting is “throwing away your money” or “paying someone else’s mortgage” which, isn’t always the case. It’s important to consider the unrecoverable costs of both renting and owning.

What does security of tenancy mean?

It means less stress! When you are a homeowner, your home is yours and you don’t have to worry about your landlord moving in or selling their own real estate investment. That said, being a homeowner comes with its own set of stressors. Paying your mortgage, maintenance costs and taxes being just a few. There are a few things first time home buyers wish they knew before taking the plunge into homeownership.

And while these benefits are certainly there, if you’re on the fence of whether you should buy now or continue to rent you should also consider capital flexibility and freedom of mobility.

Capital flexibility as a renter vs. an owner

As a homeowner it’s difficult to use your money where you want, when you want. Not only have you likely put all or most of your savings into your downpayment, but you’re now locked into a mortgage, which means those payments come every month (or more often, depending on your payment terms). Much of your lifestyle will revolve around servicing your debt.

As a renter, you have more capital flexibility and are able to access your capital if you want to make a big purchase or go on a trip.

Freedom of mobility

Once you’ve made a real estate purchase, it becomes a lot more difficult to move to a new city or take on a new job as you will be tied to the city where you purchased your home. The general advice for buying real estate, is to hold your investment for at least five years before selling.

There is much more to owning a home than simply a downpayment and a mortgage, and there are a few other factors to keep in mind as you continue your home buying journey.

We also recommend looking into new models of homeownership, such as Key, where you can start owning real estate for just 2.5% of the value of your suite as well as no need to qualify or get locked into a mortgage. Start by learning more about co-equity models and then take a look at Key’s model and how we make owning real estate possible.