Emperor Akbar (1542-1605), gave three coins to his minister Birbal, and asked him to spend them in such a way that when he spends each coin, the effects should be felt here (in this world), there (in heaven) and neither here; nor there.
Birbal being the intelligent one quickly used the first coin to buy a box of sweets for himself and ate it all.
From his second coin, he fed a poor and a hungry man.
And with his third coin, he gambled and lost it.
Birbal then explained to Akbar, "The money I spent on sweets is the money which gave a benefit here, on this earth. The money I spent on buying food for a poor man is the money which gave a benefit there (up in the Heaven), and the money I spent on gambling, benefited no one, neither here nor there”.
Moral of the story: Spend Your Money Wisely!
Real Estate Perspective of here, there and neither here nor there
When one buys a property, his money stays here in this World. That’s why real estate is sometimes called Real Property. It can go up, or down, but eventually it goes up. Real estate is often passed on to one’s estate or goes to the second generation, who reap the material benefits of inherited wealth.
There are people who do acts of charity, support some good cause or donate a part of their wealth/real estate to the less fortunate or to a non-profit institution etc. The effect of this Godly Act is felt up there (in heaven).
And when you rent, it is something that stays neither here nor there, if you look at it from a real estate perspective for your own self. Sure, from a landlord’s perspective, it is landlord’s money earned here.
I do not mean to say that all those who are renting are wasting their money. Renting does make sense in many circumstances, like, you don’t have a down payment, you don’t have a good credit, you are saving for your first down payment, you have just moved to a new place and want to rent first to see how the place suits you, you are not sure if you will be moving within 2-3 years etc.
Does renting makes sense in Mississauga if you have a good credit and a five percent down payment?
Sure it does NOT; let’s look at the numbers below (E. & O.E):
Some rough numbers you may use in rent vs. buying calculator, applicable to Mississauga condos
- Monthly rent: $1,000 (studio), $1,300 (1 BR), $1,350 (1+den), $1,550 (small 2 BR condo)
- Monthly renter insurance: $20
- Annual rent increase: 2.5%
- Purchase Price: $200K (studio), $240K (1BR), $250K (1+den), $290K (2BR).
- Loan amount: Reduce 5% down payment from above amount and add 2.75% mortgage insurance.
- Home Appreciation rate: 3%
- Amortization: 25 years
- Interest rate: 3%
- Annual property taxes: $1,500 (studio), $1,900 (1BR), $2,000 (1+den) and $2,200 (2BR)
- Annual condo fee and content insurance: $3,300 (studio), $4,000 (1BR), $4,550 (1BR+den), $5,200 (2BR)
- Years before selling: Buying real estate will make no sense if one sells in less than three years, in my opinion
- Selling cost: 6%. Includes real estate commission, lawyer's fee on selling etc.
Buying cost also includes land transfer tax, lawyer’s fee and closing adjustments. For a small 1 BR condo in Mississauga, one can expect approximately $5,000 in the above costs. And if you are a first time buyer, you are looking at a maximum rebate of up to $2,000. That is, you will end up paying up to $3,000 only in closing costs.