Home inspection and due diligence: protecting your buy vs rent math

Why due diligence matters for buy vs rent

A renter’s major repair risk sits with the landlord. An owner carries it. The calculator represents that with a maintenance allowance, a percentage of the home’s value each year, and a separate line for special assessments or major repairs.

In the default illustrative scenario ($600,000 home, 20% down, ten years), buying finishes ahead by about $41,686 with a 1% maintenance allowance. Add an extra $2,000 a year for assessments or major repairs and the lead shrinks to about $13,036, with break-even pushed to about 8.3 years. At $4,000 a year, renting and investing finishes ahead by about $15,613. Due diligence is how you replace those guesses with facts about the actual property.

The home inspection

A home inspection is a visual, non-invasive review of a property’s major systems and structure by a qualified inspector. It typically looks at the roof, exterior, foundation, heating, plumbing, electrical, insulation and ventilation, and may note signs of moisture or past damage.

An inspection is not a guarantee and does not predict future failures. Attend it if you can, ask the inspector to explain the condition and likely remaining life of big-ticket items and request a written report. The calculator’s default inspection cost is $600, which is a planning estimate; get a quote.

Most offers include an inspection condition so you can negotiate, renegotiate or walk away if serious problems appear. Ask your agent and lawyer how that condition should be written.

Condominium documents

With a condominium, the building matters as much as the unit. Documents typically include financial statements, the reserve fund study, minutes of board meetings, bylaws, insurance information and details of any planned or past special assessments.

Read them, or have a lawyer review them. Look for signs of underfunded reserves, repeated assessments, major repairs ahead and legal disputes. These feed directly into the fee growth and assessment inputs; see condo fees and special assessments and the condo vs rent tool.

Title, legal and insurance checks

Your lawyer reviews the title, registered interests and, where relevant, land survey documents, and handles the transfer. In Alberta, buyers commonly ask about a Real Property Report; your lawyer can say what applies to your purchase. Title insurance is also usually offered and the calculator assumes $300 as a default.

Get an insurance quote before you finalize the purchase. Some properties are harder or more costly to insure, for example because of age, wiring, heating systems or past claims. Premiums feed into the monthly cost of ownership, and see home insurance vs tenant insurance.

A due diligence checklist

Use a checklist so nothing slips between the offer and closing. The steps below are typical, and your own situation may require more.

• Book the home inspection and read the full written report
• Get quotes for any repairs the report flags
• Review condominium documents, if applicable, with a lawyer
• Have your lawyer review title and survey documents
• Request a home insurance quote, and ask about conditions
• Confirm the property tax amount and utility costs
• Verify any suite’s legality with the municipality (see secondary suites)
• Confirm final mortgage approval before your conditions expire

Updating your numbers, then deciding

Once the report and documents are in, update the calculator. Increase maintenance for an older roof or furnace, enter an expected assessment for a condominium, and use real insurance and property tax quotes. If the comparison now favours renting, that is useful information you obtained before closing.

Remember that conditions have deadlines. Plan inspection and document review early in the condition period. For an overview of the whole process see buying a home in Calgary.