Today’s video asks, what are three key questions every first time buyer should ask themselves, before purchasing a condo?
Question number one. Am I ready to give up a little bit of freedom? Make no mistake, when you purchase a condo, you’re entering into a serious, committed, long-term relationship with your property taxes, with your mortgage lender and your monthly commitments such as maintenance fees and utilities.
This is not the kind of relationship that you can easily say bye-bye to. This is a kind of relationship that imposes every month until the day you sell or pay off your mortgage in full.
And even after you do pay off your mortgage in full, property taxes and maintenance fees keep on coming. From that perspective, this is a serious, hand held, committed relationship from the beginning, right on ’til the end. So it’s really important for you to keep that atop of mind that in entering into purchasing a condo or just about any kind of real estate, you are going to lose a bit of financial freedom.
Question number two. Am I buying for today, tomorrow or a combination of both? Here’s what I mean by that. If you’re a couple, and you’re considering kids in the next two or three years or less, a condo with close proximity to daycare, good schools and in close proximity to family supports, then that’s something you should consider from day one.
That’s something you should consider right from the beginning. It should be one of the key criteria in your buying decision. The reason is quite simple. As time pushes forward, the trend is going to be up for each of those elements. There’s going to be more competition in daycare centers. Of course, more competition typically means more money, more commitment, it’s more expensive.
You may or may not get your child into the school district where you currently live. We have 100,000 people coming into Toronto every year. That picture dramatically changes basic access to those elements. What about square footage, what about size? If the family is going to be expanded, then that’s also something you must consider right from the beginning.
Over the past few years in Toronto, and not just Toronto, this is pretty much a global phenomemon. Size has been trending smaller. It’s only going to get smaller from here. It’s most definitely in your interest to future proof that element of your purchase as well. Of course, assuming you have the resources to do so.
On the other hand, on a flip side, if your goal is just to get into the property market, to become a homeowner, to become a condo owner, to become a first time purchaser, then you might want to focus most of your criteria on today, your goal is just to meet the basic criteria.
You do not necessarily need to future proof every element on the buying check list because that’ll be fairly expensive and your goal, remember your goal, your goal is simply to get into the property market and if historical norms continue, i.e. double digit growth over the next few years or even single digit growth in the next few years, then you’ll be able to potentially transition to something else down the road as your income grows and property appreciates. Question number three, why now?
Maybe you’ve been looking at the directions of prices and interest rates and you’re concerned that if you do not make a decision, you might be priced out of the market. Maybe prices have soften and you perceive that as a golden opportunity to make a decision. Either way, either strategy is called timing the market. Let me be the first to tell you, it is far from a perfect science.
Trained economists with PhDs often miss the mark in predicting the direction of the economy. Sophisticated software models often miss the mark in predicting the long-term direction of interest rates. What are the odds of you making an informed, educated guess? Under the direction of the real estate market or the interest rate market? Very low, so what do you do? The reality comes down to this question.
What are your personal circumstances? Personal circumstances ultimately comes down to this. Am I emotionally ready to become a homeowner? Am I financially prepared to become a homeowner? These are questions that you must figure out on your own before soliciting advice from your real estate agent, your mortgage broker, your financial advisor.
You must understand your personal circumstances first. So to recap quickly, number one, am I ready to sacrifice some freedom? Number two, am I buying for today, tomorrow or a combination of both? And number three, why now? Of course, these are not the only questions to ask but I would argue, for most first time buyers, these are questions that you wanna answer yourself first before soliciting opinions of other people. Thanks for reading, hope that was helpful, talk soon.