Blessed by the Potato

We’re back at it: looking to move again, just two short years after the last go-round. A strange smell has been coming out of the A/C the last few months, which has driven Wayfare into an allergic/asthmatic reaction (my nose also gets runny when the A/C is blowing, but I don’t mind it if I get cool air in exchange). Unlike our previous house, there’s no visible mould, and no visible water getting in, either. It might not be mould — it could be some other allergen like mouse dander, or asbestos, but mould’s the working hypothesis*.

Our best guess as to the source involved the clogged/mis-levelled gutters, which created an uncontrolled waterfall right on the side of the house where the A/C is every time it rained. But after getting that fixed the problem has only gotten worse. While we’re pretty sure our landlord would fix it if we asked (like he fixed the gutter and the water leak on the other side of the house last year) — which is a trait very much unlike our last landlord — we just don’t have any idea what the problem might be, and if we can’t keep him focused on specifics, nothing will get done.

I’m loathe to move: the location is perfect, and we (or more properly, Wayfare and her parents) have put a tonne of work into the house fixing all the minor things that were wrong with it. But if you can’t breathe the air, well, that’s no good. The final straw though was when sewage backed up into our washing machine. I don’t think that any blame can be ascribed to the house or the landlord for that one, but it was just enough to make us throw our hands up in the air and decide that yes, we should move.

Once again, we dove into the housing search. We found a lot of houses were listed with realtors this time around, though we had a bit better luck with getting them to return calls and set up appointments. Still, some disappointments: a few that never called back, one that called back and didn’t seem to know how paging and calling back worked (“Who is this?!” “Umm… you just called me.”). Overall communications were quite poor, which I still find surprising since a realtor’s job is basically to communicate with people. There was one townhouse complex I was curious to see: it’s a small complex, I’d guess no more than 10 units total, and 3 of them were on the market at the same time — made me think we’d have a good chance of low-balling a bit. Yet we couldn’t get in to see any of them: one realtor just didn’t return our calls and emails, another returned my email but then took a few messages to get the concept of wanting to set up an appointment to see the place, by which time a few days had passed and my visit to Toronto was at an end… and he wouldn’t set up an appointment with less than 24 hours notice. At least 3 places went off the market before we could get in to see them.

For the houses that we did see, we were pretty disappointed: one with obvious black mould, another that wasn’t in very good shape (carpet in the basement that could not have been more recent than the mid-70’s, a really bad paint job, and what looked like booby-trapping: toothpaste on the handle of the bathroom drawer, a sanitary napkin in the storage area of one of the bedrooms… ick), and one that we think maybe someone died in (reeked of mothballs and possibly mould as well; tiny kitchen, smaller than many apartments; 6 bedrooms, but each was tiny, and no living room; and the new wood/laminate flooring in the basement had been laid down incorrectly, so it dipped and sagged with every step).

Then we came across what was basically the perfect house: a bit bigger than what we had now, and newly renovated so we wouldn’t have to do any of the crazy work we did on the current house to get it livable. The main issues were the location (further from the subway than we’d like, but nothing can be done about that) and the price (quite pricey for the size and location, and at the absolute top-end of our “we’ll just never eat out again” rent budget). For the price we could attempt negotiations, which I did. In the end, we only got 2% off the price, but that’s still better than nothing. What was interesting though is that we also offered for a November 1 possession — we hadn’t yet given our 60 days notice to the old landlord, so even then we’re going to have a month of overlap. The new landlord though fired back initially at the negotiation attempt, saying that she was already “giving” us the equivalent of 2 months rent by letting us wait until November to take possession. That point didn’t fly with me though: first off, it was already mid-September, so there was zero chance she was going to get someone to take it for Sept 1 (maybe a mid-month possession of Sept 15). And even then, for a detached house the renter pool tends to be like us: looking for more time before moving in (though on the flip side, perhaps to stay for longer), so I don’t think she can even count “giving” us October as a loss — it was very unlikely (but not impossible) that she’d ever find someone for an October 1 possession.

For the obligatory rent-vs-buy analysis, this house last sold at $X, and then was significantly improved by the landlord (new kitchen, a few new windows, upgraded electrical, new washer/dryer, new A/C). So if we were to buy it in the current condition, it would likely cost $1.2*X. Yet the price-to-rent is 225 times X (270 times the estimated current “value”!). If we assume that we took a fixed-rate mortgage at 3.5% and never had rates increase on us, that rent increases 3% every year, that we stay there for 10 years (for calculating transaction costs), no CMHC req’d, and that zero maintenance needs to be done over that 10 years (since almost everything is new now) — in other words, assumptions that are about as favourable to the owning case as I can make them without having to rely on boom-times price appreciation — it would still cost about as much to rent as if we managed to buy it for $X — it’s like getting the renos for free. And of course, the actual cash flow impact is less (the mortgage payment alone would be more than rent; even though some is principal repayment, there’s less flexibility there). If I assume what is, IMHO, a more realistic scenario (rent only increases 2%, and the mortgage rate averages 4.5%), then opting to rent is like getting this house for 30% less than what we’d have to pay to buy it now.

So yeah, we’re happy to take the rental option and not have to deal with owning in this market.

And one other source of savings for the renter we haven’t discussed before: life insurance. Since we don’t have a mortgage or dependants, we don’t really need life insurance at the moment, but would if we borrowed. Oh, and: lawn care is included. That’s like another $700/year benefit.

Here are the before/after pictures of the kitchen, to give you an idea of how thoroughly renovated the house is:

* – Yep, it’s mould. The work guys just had the wall boards off, and I’m told it’s back there.