Buying your first home can be scary, but then again doing anything for the first time can be scary. Remember how nervous you were getting behind the wheel of a car for the first time? What about first time you asked someone out on a date? Did you feel 100% confident? Even if you're Brad Pitt, I'm going to guess the answer is 'no'. (And if you are Brad Pitt - what's up, Brad? How's Angie and the kids? I loved you in Fight Club & Ocean's 11 & 13 - but what happened with 12? You guys really dropped the ball on that one. But I can't talk right now, I have a blog to write - call me later.)
Be it your first or your 15th property, buying a house is a huge step in your life - after all, it's the most expensive thing most of us will buy in our lifetime. Like other milestones, it's completely normal for you to feel a little anxious or uncertain about buying your first home - but just because you have a little anxiety or some uncertainly doesn't mean it's the wrong choice.
If
you're a Baby Boomer and you're reading this, your idea of a first-time
home buyer is probably someone in their early 20's, fresh out of school,
looking to buy a 2- or 3-bedroom home for the family they want to start in the
near future. However, times have changed and first-time home buyers
aren't so easily identifiable anymore. Not only have their starting points
change significantly, but their needs and wants have changed as
well. I've met new buyers from all walks of life - from 18 years old
to well into their 50's; some getting financial aid from their parents and
others financing their own purchase; some looking for bachelor apartments in
the ByWard Market and others wanting more acreage out in Vars or Carp.
Everyone has a different set circumstances that effect when and if they
can buy their first home and what type of home it will be.
One thing I have learned in meeting such
a wide variety of first-time buyers is that everyone has similar fears and
concerns. When you were mustering up the courage to ask your crush out on
that first date, do you remember all the questions running through your head -
What if my breathe is bad? What if they don't like me? What if they
like someone else instead - like Brad? (Stay out of this Brad! I told you I was busy!) The
point is, we all have fears to overcome when we try something for the first
time. Although some of these fears are more rational than others, but
they all have to be dealt with before we can move forward comfortably.
Here's a quick list of the questions or
concerns I hear most from first-time buyers....
1. "Renting is easy, owning is hard - I'm a
path-of-least-resistance type of person."
As the old adage goes - nothing worth
having comes easy, and owning a property of your own is something definitely
worth having. It's true that renting a property is easier than owning -
as a renter you might be responsible for a few maintenance items, but generally
you can contact your landlord or property manager to take care of most of it.
However, being a property owner isn't that difficult and, like anything in
life, the more properties you have bought & owned, the easier it becomes.
Plus, as you'll read in a moment, the benefits and advantages far
outweigh the time & effort you put into home maintenance.
Now if you aren't a fan of property
maintenance and upkeep (And let's be honest, who really is? Does anyone
actually enjoy cleaning out their gutters or window wells?) There
is a great option for you - condominiums! Condos come in all shapes and
sizes - apartment-style condo in towering high-rises (Soho Champagne) or 3- or 4-storey low-rise buildings (Qualicum Woods Crossing), terrace and regular townhouse condos
(Hunt Club Towns) and many more. Regardless of their
shape or size, one of the best features about a condo is the maintenance (or
lack thereof) that they require - especially the apartment-style condos.
If you own a free-hold property or
non-condominium, as the owner you are responsible for just about everything.
However, if you own a condo you have limited property ownership rights,
which means you don't have total freedom to change everything on your property,
but it also means you aren't responsible for much of the typical maintenance
you would have if you owned a non-condo. For example, the apartment-style
condo I used to live in had a balcony and windows - those were pretty much the
only exterior features of the condo and I wasn't responsible for either.
I had exclusive usage rights to the balcony, but if it ever required
repairs or maintenance, or the windows had to be cleaned or fixed, the building
property manager handled it. On the inside of the condo, I had to change
my furnace filter every 3-6 months but that was it as far as maintenance was
concerned.
2. "I don't pay that much in rent, and home
ownership costs are about the same - so why would I change?"
If you are a tenant, every rent cheque
you pay, each small household item you fix, any payments or improvements to the
property made by you goes on to help someone else. On the other hand,
when you own your property, a portion of your mortgage payment, the maintenance
and upkeep you put into the home comes back to you in the form of home equity. Now some of you may be thinking 'Home equi-what?
Wait, I don't care. I only pay $1,300/mo. in rent, I'm sure my costs for
owning a home would be about the same or maybe more! So how much further could
I get owning a home?’
I'm glad you asked, let me show you... (Try to stay
awake, there's some math coming your way).
Meet Owen & Brent. These best
friends are so tight that they just moved into separate 3 bedroom/2 bathroom
townhouses next door to each other in suburban Ottawa. They each spend about
$1,300/month + utilities to live in their respective homes. The only
difference - Brent rents his home and Owen owns his home.
At first glance it looks like these two
are essentially in the same position - similar houses in the same neighbourhood
with the same living costs. But let's jump into our DeLorean to
time-travel ahead 3 years.
After 3 years both Owen & Brent would
have spent $54,000 each in living costs - for those keeping a tally:
that's $1,500 per month ($1,300 + $200 per month for utilities) for 12
months for 3 years. Since they both pay the same utilities, let's go
ahead and remove that cost from their totals, which brings that number down to
$46,800.
In Brent's case that entire $46,800 went
to his landlord - aside from a few rent receipts and keeping a roof over his
head, Brent has nothing more to show for that money he spent. When's the
last time you spent over $40,000 and hardly had anything to show for it?
In Owen's case, of that $46,800 about
$16,000 went back into Owen's pocket. The principle portion of his
loan/mortgage was paid down by $16,000, meaning that Owen now has access to
that money should he need it. It's not cash sitting in his chequing or
savings bank accounts, but he has access to it if an unforeseen expense comes
up.
On the surface both Brent & Owen were
paying $15,600 per year, but digging deeper into the numbers Owen was really
only spending $10,267 - or one third less than Brent. I'm not sure
about you but when I was a tenant I would have loved to pay one third less in
rent.
3. "The house is nice and all, but it doesn't
have everything I want - I'll wait to buy something nicer."
I've heard this a lot unfortunately.
First-time buyers go to their bank and start the process to get
pre-approved for a mortgage. Before they get their pre-approval they
start looking at all the beautiful houses on the internet or on reality TV
shows and get excited - his & her walk-in closets, new stainless steel
appliances, huge master bedrooms looking out over an in-ground pool. When we
start to visit properties that actually fit their budget, reality sets in (Whoa, whoa,
whoa, are you telling me that reality TV isn't actually reality? Do the
Kardashians know about this?). They become discouraged and
unenthusiastic because the homes in their price range don't have the lavish
kitchens with granite counters or spa-like ensuite bathrooms like the ones they
saw online. Quickly their discouragement gets the best of them and
suddenly staying in their current situation, be it renting or living at home
with their parents, seems like the best option.
I'm not here to be a wet blanket, but
your first home typically won't look like it could be featured MTV's Cribs. However, there are ways to update and improve any
home to better suit your needs and you won't have to eat ramen noodles for a
year to afford it. All it takes is a little imagination, some
patience & a hard-working real estate agent.
I bought my first home for less than
$200,000. No, I didn't buy it in 1983 where you could pick up a 4 bedroom
home for less than $100,000 - I bought it in 2008. It was a 40+ year old
3 bedroom/2 bathroom townhouse - practically nothing had been updated since it
was built. I'll be honest, when I first saw the property I wasn't
impressed and I couldn't wait to leave. It had a very dated kitchen with
appliances older than me, the paint on the walls was faded & chipping, and
the basement looked like the set of the next Criminal Minds episode. But
the home was originally constructed by an up-standing builder, offered a lot of
living space, and had other beneficial features such as hardwood floors (albeit
they weren't in great shape), newer windows, private rear yard, etc... - it
definitely had some potential, you just had to know where to look.
Prior to searching for a house I had
already been pre-approved, so I knew I would be able to afford the property - I
just didn't want to live in it as-is. I spoke to the bank about the
situation and through some creative financing my banker was able to not only
secure a mortgage on the property but also a loan for renovations as well -
suddenly that dungeon ummm... I mean, basement and dreadful kitchen weren't as
concerning. We structured the offer to ensure I was able to get the best
price and included the necessary conditions so that I was well protected.
We brought in a general contractor to devise a renovation schedule and
requested a move-in date so I didn't have to live through the heavy part of the
renovations. Once the offer was accepted I met with an interior designer
to finalize the colours I wanted and materials to be used for the renos.
45 days later the property was mine and another 45 days after that
the property finally looked like I wanted and I moved in.
Now this is the point where I normally
hear "Taylor, you are part of a
family-owned real estate brokerage - you have access to all of these great
resources, and I don't. I'm glad you got the home you wanted, but how
does this help me?” It's
true, I am part of a family-owned brokerage and I learned a lot about real
estate long before I ever thought I would become a real estate agent - but the
services, knowledge and list of preferred partners I used to accomplish this
home purchase and renovation are exactly what we provide our clients.
I could have easily waited for that
"perfect house"; taking months to tour dozens and dozens of houses,
all while throwing money away on rent. But instead of waiting for that
perfect home, I made a home perfect for my needs. Because I was able to
negotiate a low price, even after I paid for the renovations, I still paid less
than if I bought a more updated home in the area. Plus, I got to pick the
colour scheme I wanted, I was able to change a few things with the layout to
better suit my needs and I discovered the backyard fence was incorrectly
erected - my yard was about twice the size that I originally thought.
When the renovation dust finally
settled....
1. I paid much less for my property than
my neighbour, even after the renovation costs were added, primarily because I
was willing to buy a "dated" home.
2. I was able to select the specific
cabinetry, countertops, flooring stain, paint colours, etc... that I wanted.
I was even able to make some changes to improve the layout.
3) I ultimately sold it at one of the
highest sales prices in the area and the money I made on the sale allowed me to
buy a newer property that was closer to being my 'dream home'.
4. Buying seems like a big commitment - what
if I move to Fiji
next month?
Okay, Fiji may be a bit far-fetched, but
I often hear these comments about uncertain futures from recent university or
college graduates that aren't sure where their lives will take them and they’re
apprehensive of planting their roots only to have to start over in a different
city. While some of us may land a job in Europe, Asia or simply another
Canadian city, most of us will end up working in the city we grew up in - not
to scare you too much but there's actually a good chance you'll end up living with your parents
again (If you're lucky they will have kept your Spider-Man
bed sheets and let you hang up those Baywatch posters again!).
No matter how much we try to plan our
lives, there will always be some uncertainty in our futures. Even if you
took the plunge and bought your first house, only to be offered your dream job
in Paris a few days later, with Ottawa's traditionally low rental property
vacancy rates that property can easily become a sturdy
income-generating rental property for you. I know it may seem a little
unusual for you to live in one country or city and own a home in another, at
the Bennett Property Shop we work with many international buyers/investors who
have specifically selected to buy a rental property in Ottawa due to the stable economy, low vacant
rates, and growing population.
Whether your looking to buy your first
home this weekend or just thought about home ownership for the first time a few
minutes ago, you want to make sure you're working with an experienced professionals
to help make this exciting new life transition as smooth and stress-free as
possible - contact the Bennett Pros TODAY 613-233-8606 and
take the leap!
Thanks for reading.
Taylor Bennett
Sales Representative - Bennett Property Shop Realty
www.BennettPros.com
Taylor@BennettPros.com
@OttawaTails
