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Does it make more sense to buy or rent a home from an investment perspective? It’s a question I get asked more than any other. The answer, in an era of historically low interest rates and perpetually rising real estate values, appears to be obvious: buy.

Just ask any real estate agent and they’ll tell you, “Don’t pay your landlord’s mortgage for him,” or “Build equity for yourself instead of flushing your money down the toilet,” and our favourite, “There has never been a better time to buy.”

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It all sounds pretty convincing, but it’s wrong. Unless you need the security blanket of owning your home, it is nearly always a better financial move from an investing standpoint to rent rather than buy. The reason: People rarely consider three major costs of owning a home.

1. The round-trip costs of buying and selling

The largest expense when buying a home is the land transfer tax. In most jurisdictions, this can amount to at least 1.5% of the purchase price. In the Greater Toronto Area, it’s closer to 4%, which comes close to the rent you would pay on a similar residence for an entire year. And, keep in mind, this is paid in after-tax dollars.