Tag Archives: rent vs own

A Great Mortgage Broker Ad

The hardest thing for renters is to get into owning their first home. Whether it’s a condo, duplex or single family home, the down-payment and Trudeau stress test make it next to impossible. But we’ve talked about that over the past years multiple times.

Last week I heard a great ad from a mortgage broker. Sure, the radio ads are only 30-seconds and it’s a little misleading and leaves out all the details, but the numbers are correct and reinforce why “getting in” is the hardest step – but so worth it over the long term.

The numbers don’t matter in the ad, but the logic does: If you’re paying $1,500 rent over the next five years, you’ll be paying $90,000 to your landlord. A $250,000 home will cost you around $1,440 in mortgage payments and will give YOU $30,000 in paid down equity in the five years. Call us…

Plus, you build equity a second way: Through the increase in property values. Some years it’s a ton – some years it’s nothing – but historical averages (just search for that term) show that equity builds around 5 percent a year. Right now, excluding the insanity of Vancouver and Toronto) the market is on fire for any homes under $500,000.

I’m in a duplex where the other half sold in November. Fast forward to today, and the lady has already seen the market value increase by over $60,000! That doesn’t happen each six months, and she doesn’t care as she’s not selling. But that’s pretty impressive – but only to make a point that you’re never building equity off your monthly payments or ever seeing a value increase if you’re renting!

We Now Live In a Subscription Society

20 to 30 year-olds have changed our entire way of purchasing things. Millennials typically don’t want to own much, they want to be able to use it – and that’s done through subscriptions or rentals. They’re renting access versus owning things, and it’s changed the business model of vast numbers of companies and entire industries.

Some things we all have to rent or pay monthly because we can’t actually own them. Those include utilities, cable TV, gym memberships and the likes.

Many others just leak out $10 or $20 bucks at a time for years and years. There are now lots of phone apps, some from the major banks in the U.S. to scan your credit cards for subscriptions you may no longer be using but still paying for.

Microsoft Office is $11 a month for life or $79 to buy and own

You cell phone can be $40 (that’s mine) or $50 a month with two or three gigs of data instead of $100 or more

Streaming music subscriptions and Netflix, etc. are going to be $30 or more.

Netflix just hit 150 million subscribers and has single-handedly destroyed the idea of even owing movies on DVD. Want proof? They have over 150 million monthly subscribers and just paid $100 million for one year of the rights to the show Friends.

That’s fine if you’re not also paying for cable. But if you do – that’s a ton of very expensive doubling up

Amazon Prime is $80 a year. Are you really getting value from that or just want something shipped a day faster than I get it without paying for Prime?

Here in Edmonton, as most cities, we now have electric scooters from Lime and Bird. They’re great, but $1.15 to start and then 35 cents a minute. So using it twice a week as a rental will be way more expensive than owing a bike within a month or two.

Getting the use of a vehicle is now available by subscription – or on demand use. Pogo has been around for years and other companies, including the manufacturers such as GM are starting in this area now. You’ll pay based on the time and mileage used and can pick your class or size of the vehicle: small car, sedan, pickup, SUV, luxury, etc., and it’ll usually include insurance coverage as well.

Ask yourself:

What’s the cost of owning vs. renting

Will I use it enough to justify the subscription or membership?

Will I actually notice when the subscribers put through their price increases or will it just keep growing the balance on my credit card?

Will I remember it’s on automatic renewal to cancel it if not being used?

Two Really Smart People Gave Me Really Bad Advice

On my computers, I’m working with Microsoft Office 2007, and it was time to get current with an upgrade to Office 2016. The program can be purchased for a one-time price of $79 with licenses for three computers. Yet, buddy number one, who is actually in the computer business, suggested I should really do it as Office365 with monthly payments of seven bucks to also get the upgrades as they come out.

I have perfectly good nine-year old word, excel, powerpoint and outlook programs. $7 a month for the rest of my life on EACH of my computers? What can possibly be upgraded frequently enough to justify spending $1,260 over the next five years versus $79? No chance – that’s insane. But that’s EXACTLY how Microsoft and a ton of companies with monthly fees make their money.

Buddy number two wanted to get a newer iPhone. I just purchased an iPhone 6 for $240 two weeks ago. And for those, Apple will replace the battery for $35 to avoid a bunch of U.S. lawsuits. I offered him the name of the company in Winnipeg that sells these, as I’ve bought four phones from them.

He looked like I had three heads when I suggested that. But I can get one for free with my carrier! No, it’s  not free. To which he responded, well, with a new two-year plan… Yes, a highly intelligent man really thought he was getting a brand new iPhone for free.

Intellectually, he knew it wasn’t really free. Yet all the marketing from his carrier and that part of our brain that tricks us had him convinced enough to block out the facts and the logical part of his brain. He’ll be trapped for another two years contract at close to double what he ought to pay to get this supposed “free” phone!