There are a few common questions that I frequently get asked or that I overhear in conversation. They tend towards the current craziness of the market and the prices of properties. People are uncertain of what to do or how to proceed. Hopefully I can offer a little comfort or guidance by addressing these common concerns.

Question: I want to buy a house but can’t afford what I want. I can afford a condo or a small home in the outskirts of town but I don’t want to live in a condo or too far from work.

Answer: Buy within your budget and rent it out. The rent from the tenants will cover the costs of the mortgage, utilities, condo fees and any other expenses you might have. You can continue living where you currently are, or renting, and in as little as 2 or 3 years you can sell the property and use the money to buy something better suited to your needs. If you do not want to sell, you can refinance the property and pull out equity to use as a down payment on a new house. Keep in mind that if you decide to keep the first property and refinance, you can also claim the rent from the tenants as income. Speak with your mortgage broker about which option is best for you. Either way, your money invested in real estate will increase in value faster than it would if you left it in a bank, and in most cases will out perform most other investments. Bottom line, you will come out on top.

Question: With the market as crazy as it is right now, is it a good idea to save for a higher down payment and wait for everything to calm down?

Answer: This is perhaps the most asked of all common questions that I hear. Unfortunately property values are currently increasing year over year by roughly 20% on average (Some markets even higher). Even with entry level homes of $500,000 which are difficult to find, the price next year if things continue as they are will be $100,000 dollars more. Even if the current numbers are cut in half, you will be looking at $50,000 on a $500,000 home. To put it in perspective, a very conservative increase in price of only 5% – which we have not seen for years – would be $25,000. Can you save $25,000 in a year? What about $50,000 or $100,000?

Question: The market is going to crash, the prices of homes are going to correct, people are predicting home values will be worth much less than what they are.

Answer: People have been saying this for a long time, and some of them have even been involved with the real estate industry. The truth is, you can never predict what is going to happen in the future with a 100% certainty. All I can tell you is that the population of Canada is growing. More and more people are looking to buy a home but the numbers of houses are not increasing as fast as the demand is. In a case like this, the only thing that can really cool the market down is outside influences such as the bank or the Government. Besides, if you are looking at buying a house to live in or rent out long term it is different than buying a house as a short term “get rich quick” investment such as a reno or flip. Buying your primary residence (or one to rent out long term) protects you from these market fluctuations to a certain degree. As long as you are not forced to sell you will not be subject to lower prices. Over time the value of the house will go back up. Don’t believe me? Ask your parents what they paid for their first home. Ask your grandparents as well. If you are not an experienced investor or renovator, it is best to look at Real Estate as a long-term goal. Over time it will always go up in value.

Question: I am approved for a certain amount but the houses I want are a little more expensive OR I am not comfortable spending my full budget because the monthly payments are too high.

Answer: House hacking is a term used to describe “living for free”. What some owners are doing is renting out rooms or the basement at a rate that essentially covers the mortgage payments. If you can show the rent that you would get from these tenants, the lender may apply it towards your income. This higher income may qualify you for a higher loan so you can get that slightly more expensive house you want. If the house is within your budget but you are worried about the monthly payments, a tenant paying rent can help you significantly. It is important to speak to your real estate agent about any bylaws or associations that may restrict what you can do.

Did you ask any of these common questions yourself? Did I address them enough to calm your concerns? If not please feel free to reach out. If you have any other questions or if you feel uncertain about something, let me help you. It is important to feel comfortable, or at least educated, with what is likely the largest investment in your life.