Do you think a realtor could actually recommend not buying property, but instead renting? As you’ll see in a second, this question is anything but rhetorical.
Today, let’s take a look at an alternative angle on the age-old Shakespearean dilemma: to buy or to rent. Who might benefit more from renting, and in what situations could renting be financially smarter than buying a home?
In the classic “buying” scenario, we usually start with: “Let’s grab 20% of the house price from the drawer and use it as a down payment.” But here’s the little hidden detail: what if you used that serious chunk of money in a different way? And by the way—why is your down payment just sitting in a drawer instead of earning you money?
Here’s something not very obvious.
Real estate, generally speaking, often isn’t the best investment. At least not in North America. The stock market (take, for example, the fairly conservative index of the largest companies, the S&P 500) usually shows stronger results over the long term. On top of that, for investment purposes, the stock market has loads of advantages—starting with a much lower entry barrier, and ending with much higher liquidity. Real estate, on the other hand, is meant first and foremost for living in.
If you think the stock market is “too risky,” let me break it to you: investing in real estate is no less risky. And current times prove it—if you bought something in Toronto or its suburbs three years ago, chances are you’re in the red right now.
So, how can renting actually work out better financially?
The trick is to take your potential down payment—and all the money you don’t have to pour into home ownership (because like it or not, owning usually comes with a bunch of extra costs, which you save on when renting)—and invest it. That requires discipline. If you’ve got an extra $100, $500, or $1000 a month left over, don’t blow it on a vacation or a new car. Set it aside, invest it, and basically forget about it for a while. And if you’re curious about exactly where I invest, just give me a call at 416-305-6525—I’ll gladly tell you, no secrets here.
Here’s a real-life example: a house at 19500 Hammond Rd, Pitt Meadows, BC V3Y1K4 was listed for sale back in 1974 for $51,900. The very same house sold in 2024 for $1,655,000. That’s over 30 times growth in 50 years!
A super profitable and lucky investment? Yes, absolutely. But translated into boring accounting language, that property appreciated on average 7.16% per year—and that’s while the house needed multiple updates (roof/windows), plus it was completely rebuilt in 2012.
Meanwhile, during the same period, the MSCI World Index (reflecting the global stock market) grew by an average of 10.2% annually, and Canada’s S&P TSX Composite grew by about 9.44% annually. And that’s even factoring in the dot-com crash and the massive market drop in the early 2000s (all data courtesy of Ben Felix, Chief Investment Officer, PWL Capital Group).
Now, this doesn’t mean you shouldn’t buy real estate.
The point is just that a house, as an investment, isn’t nearly as straightforward as it might look at first glance.
Still, there are some clear benefits to real estate as an investment:
1. A mortgage forces you to save. Like it or not, you’ll have to cut back on spending.
2. Owning a home protects you from panic moves like selling your stocks during a market downturn (the upside of lower liquidity).
3. Discipline. You’ll never stick to a strict plan unless you’ve somehow forced yourself into it (speaking about myself here, of course—you probably have it all figured out).
Want to crunch the numbers for your own situation and see whether buying makes sense or not? Or at least hear another independent opinion—without being pushed into buying and without the classic “you can afford it” sales pitch?
I’d be happy to help.
Call me anytime.
Serge Skyba
Realtor® at Realty 7 Ltd, Brokerage
416-305-6525
serge@agent1.ca
