There are several factors that you need to consider before you decide to buy or rent a home. Obviously budget comes into play, but there are ways to make the decision making process easier or even buy an income property so that you can eventually move to your dream location. Monique Johnson is an award-winning real estate agent. She shared her realistic advice on what you need to consider when you make the decision to buy or rent a home in the continuation of our real estate series:
Look at Your Lifestyle
If someone is questioning whether they should rent or buy, the first thing that they should look at is their lifestyle. Where do they need to be? Will they be working from home indefinitely or will they have to return to the office. If they are in the city, and will be returning to the office, there may be a chance for them to buy in the downtown core.
Speak to a Mortgage Broker
Right now, prices are dropping in the downtown core (particularly in cities like Toronto) which has never happened before. Since interest rates are so low right now [under 2% which is unheard of], talk to a mortgage broker to see what you can afford and then make your decision from there. Right now, there are some awesome deals to be had because condos are sitting on the market for 90 days due to the pandemic. If your mortgage broker says that you can’t afford to purchase a condo, continue to rent where you live or find a place closer to the area that you want to be in because rents are so cheap now. Try to save to purchase at a later date.
Look at Options That Are Farther Away
Another option, if you can’t afford to buy in the city is to look at areas that close that won’t be as expensive and buy that as a rental property. That property will continue to appreciate in value. If the conditions of the market remain the same, that property will increase in value by 10% every year. Why not have your money work for you while you are renting? That’s what Johnson did when she first got into the market. She bought a house in Ajax, but needed to be in Toronto for work, so the commute wasn’t working for her. She rented the house out, then rented a basement apartment close to where she needed to be in the city. Johnson credits that budget for being where she is right now.
Short Term Pain for Long Term Gain
You may not be able to buy where you want and the house may not be everything that you want it to be, but if you make sacrifices in the short term, it will get you closer to where you want to be in the long term. Johnson bought what she could afford, because she knew how important it was to get into the market. Houses appreciate in value significantly every year, so why leave money on the table?
Find a Partner
If you really can’t afford it on your own, and you are single, see if there is someone that you can trust to partner with you on the property. You can build up your equity, and then go your separate ways. The market will get more competitive as the pandemic winds down if interest rates stay so low and inventory gets scarcer. Remember as a first time home buyer, you will likely not be in that house forever – just focus on the first 3-5 years.