At first glance, you may wonder whether this is a difference between the price and cost of a house or condo. Despite how similar Price and Cost of housing may appear, these are quite different. Arguably adding value could further add to the discussion. Value is in the eye of the beholder. One person may see a dilapidated home as poor value. At the same time, another may weigh the benefit of its location, acquisition price and the cost to improve – long-term value that makes the purchase of the property more than worthwhile.
Price:
Toronto home and condo prices can be incredibly misleading on the surface. What we mean by this is that the “asking price” on MLS can seem very high or very low about the actual value. Understanding the value of the property will determine the actual price of purchase. Noting that “asking prices” are just a marketing tool, it helps separate fact from fiction.
How much money does someone have to pay to acquire the home from someone else? It’s that simple. Nothing vague. It’s the financial outlay to acquire the property.
➤ Every good investment needs a well-planned strategy. Start preparing with the following:
- Are Condos A Good Investment?
- How To Submit A Winning Offer On A Home
- The Most Undervalued Condos In Toronto
- Condo vs House Investment
- Why Parents Should Invest In Toronto Condos For Their Children
- Millennial Home Buying Trends
Cost:
On the surface, this may appear straightforward. However, the cost is more challenging. It is relative. What is the cost to maintain the property, mortgage debt servicing, the annual property taxes, and more space equals more furniture/paint/artwork/heating/cooling/insurance? Bigger than the functional aspects can be the cost of keeping up with your neighbours. I’m not presuming that you will…but it is not uncommon that people want to “keep up with the Joneses.” So are you repainting the exterior window trim? Upgrading your car? Improving the landscaping? It’s also called the Diderot effect, when someone spends more money to keep up appearances and the ancillary costs associated with more consumption.
When people speak of buying a money pit, they are actually referring to the “cost” to manage and improve the house over time. This is not about the “price” to acquire. It’s about their monthly and annual cash outlay over time. Understanding the actual cost of property is essential when setting your budget.
It’s essential to look at both the price and cost to move or purchase a home. Many get caught up with the “price,” but it’s the cost longterm that is worth keeping an eye on.
Understanding the price of a property and the ongoing cost to service and maintenance the property in the years to come must be weighed in order to ensure that the real estate investment is wise and practical over the long term.
