My First Home has to be my “DREAM HOME”
First Time Home Buyers juggling the trade-off between budget, space and amenities who can’t afford to buy the house they want in the metro area, purchasing real estate in smaller, more affordable markets can be an excellent way to get on the property ladder
Many First-time home buyers tend to be fixed on the idea that this is how it has to be. But when you start approaching things from an investment standpoint, you realize there are other ways of looking at owning property, and using leverage to build wealth.
While the high prices are discouraging, many people between 25 and 35 are motivated to own a property because they’re realizing that if they don’t get into the market right now they might be priced out over time. Buyer could wait and save up for their perfect home but they might not be moving at the same rate that the market is moving.
Video By Self-made millionaire and author David Bach explains why buying a home is critical to long-term financial security.
Buyers now have a very tough choice on their hands. As 600,000 used to be a very generous budget. But quickly that $600,000 has needed to become $800,000 for something decent in the city. So now, buyers will need to decide – should they get more bang for their buck outside of the city or sacrifice on space so they can still keep their city lifestyle?
How to get my “Dream Home” Sooner?
With the high cost of real estate in Vancouver continuing to push potential home buyers out of the market, some city dwellers are starting to look outside the core, choosing to rent where they can bike to work and enjoy sidewalk patio culture and instead buying an out-of-town property as an investment.
For younger home buyers, purchasing an investment property (often outside the city in which they live) to rent out to tenants can be an effective way to get on the property ladder, according to Ann Kaplan, president and CEO of national consumer finance company iFinance Canada.
“Investment properties provide you with rental income, which allows you to pay off your mortgage faster than if you were paying it off alone,” she says.
“So, the smartest way to get into investment properties is actually to just start renting out rooms or suites in your home, so you can start paying your mortgage quicker. The faster you pay down your mortgage, the more equity you build (and then you can borrow against your property to purchase more real estate).
Buy An Investment Property First
If you’re buying an investment, it’s all about the math – don’t let emotions get in the way. I know, marble counters and hardwood floors are awesome, but how much they add to the monthly rent? Real estate investing really does come down to numbers, and it’s not just price that matters. How much are the condo fees? How much are the taxes? What kind of maintenance should you expect? What kind of rent can you expect? An agent experienced in investments will be able to guide you to the profitable ones and encourage you to run from the ones that look great but don’t give the best returns.
Looking to enter the market through the purchase of an investment property? Here are a few tips from Ann Kaplan of iFinance Canada:
- If you’re buying in a condo, get on the board: Bylaws change, and quick. So do the wants and needs of a building you may or may not live in. If you’re buying property in a condo, make sure you have a hand at the table to make decisions and to stay in the know about updated legislation.
- As tempting as it is, don’t raise your tenant’s rent:A good tenant is worth more than a tiny increase monthly. More importantly, a month’s rent is worth more than a tenant who chooses to leave because of hiked rent. Respect good tenants and keep their rent stagnant as long as possible.
- Play the long game:You buy investment property so it generates income later on. Don’t worry about little fluctuations in the market along the way. Work first and foremost to pay down your mortgage with the rental income you’re collecting. Once you have built equity, you can borrow against it to purchase more income-earning properties.
- If you do choose to live in the home you purchase, seriously consider renting out rooms or suites in your home:Not only does it help you pay off your mortgage faster, but if you are planning to move a lot, this is a great way to build equity. Just remember to factor in your property transfer tax when you’re doing your moving budgeting.
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Source:
https://www.cnbc.com/2018/01/04/self-made-millionaire-tells-millennials-buy-dont-rent-a-home.html
Edmond Au PREC* Vancouver Real Estate Services 