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We’ll be blunt; Canada is not an easy place to buy a home. Decades of underbuilding have resulted in Canada having one of the most acute housing shortages in the G7. With fewer homes to go around, real estate in many of Canada’s major cities has been bid up to levels that now rank as some of the most unaffordable on earth.
But it’s not impossible, even for those Canadians who may not have the good fortune of an eight-figure inheritance to play with. Nearly 70 per cent of Canadians own their own home, and that figure is rising each year. So here’s some tips on how to join them.
Special thanks to Andrew Plank for some of the expert advice on this list (he does this kind of thing for a living).
Before you even think about going to home showings, you’re going to need to have a lender sign off on a mortgage pre-approval to give you a sense of how much cash you’ll have to work with. What you desperately want to avoid is finding your dream house, only to make an offer and find out no bank is willing to lend you enough to pay for it (in which case the sellers get to keep the deposit and can sue you for more).
Increase your buying power with a rental suite
One of the easiest ways to score more house on your current paycheque is to look for properties that come complete with rental units, be they a basement suite, a backyard tiny house or even just a spare bedroom to put an international student. And hey; you’re also helping to solve the rental crisis!
… or a side hustle
Plenty of homeowners have also managed to afford more house by boosting their income via the Airbnb trade: Do it right and you could be earning up to $4,000 a month.
Consider moving cities (seriously)
One of the most epic demographic shifts of the COVID-19 pandemic was that it prompted thousands of Canadians to flee the big city in search of a better life in the countryside. What unleashed the exodus was the popularization of work-from-home measures, which freed up many workers to buy anywhere that had a stable internet connection. Not everyone can do their job from a laptop in the basement, but buying in Powell River is obviously going to yield more house than buying in North Vancouver.
Realtors are expensive. Pick wisely.
These are boom times for the real estate trade, so the profession has attracted more than a few hungover dropouts whose skills don’t extend much beyond their ownership of a late-model Mercedes. Realtors earn about $20,000 in commission on an average Canadian home purchase, so make sure yours is delivering $20,000 in value: They should have encyclopedia knowledge of the local market, an ability to weigh and interpret risk, and a track record of beating the list price for homes.
Swell that down payment
The bigger the down payment, the better the mortgage terms, so any short-term pain you experience while scraping together your down payment will pay dividends down the road once you’ve gotten your name on a land title. Lay off the vacations, stop eating out, ditch your car (if you can). You can have that $10,000 white wedding if you want, but it might cost you a bedroom or two down the line.
Keep an eye on the commute
The further out into the boonies you go, the more square footage you’re going to be able to afford. But if you’re looking at a home that’s going to significantly increase your commute times, that’s a cost which should also be factored into the purchase price. Say you save $100,000 off the purchase price of a home, but you’re now commuting an extra 90 minutes per day. Over a 20-year period that’s an extra 7,500 hours of commuting – with each of those hours yielding just $13 in savings.
Buy with friends (or family)
Can’t afford a house in your preferred neighbourhood? Consider going in halfsies with a friend, with each of you taking a floor to yourselves. Some lenders will actually accommodate this using what’s known as “mixer mortgages.” But if you’re going to do this, you’re going to want to be very meticulous about working out a co-ownership contract.
Consider the future
The commissions and expenses associated with a move can easily consume up to 10 per cent of a home’s value. So, anticipate pitfalls that may force you to sell in a few years. Are you planning on having kids and does the home have enough space for them? Do you have disabled friend and family who won’t be able to handle the home’s stairs? Are you moving into a condo building whose anti-pet rules will dash your dreams of owning a dog?
Beware the staging
The dirty secret of the real estate trade is how much the entire industry runs on emotion. When you step over the threshold of a home for sale, you are entering an environment of sights, smells and sounds that have all been carefully engineered for you to drop your guard and do something irrational. So check if that rugs covers up a scratch on the floor, if that cutting board masks a crack in the countertop or if those curtains are covering up a rotting sill.
Keep an exit strategy in mind
The average Canadian will own between 4.5 and 5.5 homes over the course of their life. What this means is that, before putting your name on the home title, you should consider how easy it would be to sell the place if you needed to. That indoor slide or rotating home may tickly your homebuying fancy, but it could end up sitting on the market for years in a market slump.
Accept that interest rates won’t be rock bottom forever
Mortgage debt is basically free right now, and so many Canadians have overleveraged their way into homes that the Bank of Canada is scared that even a modest rise could precipitate a wave of foreclosures. Interest rates breached 20 per cent as recently as the 1980s, and while that’s an extreme case, you should budget for a future in which you can handle higher mortgage payments without going broke.
Know thy neighbourhood.
It’s probably not going to be enough to take a stroll around the block after your home viewing. Return to the neighbourhood at different times of the day. Does the entire property become a crow roost at night? Does the next door neighbour have a heavy metal band that practices every Tuesday and Thursday? Most municipalities publish crime maps to give you a sense of the likelihood that you’re going to get your car broken into. Fraser Institute school rankings can give you a sense if the local high school sees most of its student drop out before graduation.
Buy dilapidated and save!
The time-tested way to purchase just outside your price range is simply to look for a home that’s a little rough around the edges. But opting for a derelict home can also trap you into an endless quagmire of expensive and time-consuming renovations that can quickly cancel out whatever initial savings you were able to secure. That’s why the standard rule of thumb is to look for a house with “good bones”: The framing, roof, plumbing and electrical are all in relatively good shape, but the esthetic stuff (paint, flooring, window coverings, kitchen counters) is what needs attention.
Google the address
This is literally the easiest step on this list, and it’s surprising how few buyers do it. Maybe you’ll find some glowing profile in Better Homes and Gardens. More likely is that you’ll uncover some unseemly detail from the home’s past. Was it a meth lab? Did it make the cover of Asbestos Monthly? Did it kill the previous occupants due to an as-yet-unrepaired carbon monoxide leak?
Consider writing a letter to the owner
There is a whole lot of sentimentality wrapped up in a home, and a heartfelt and well-targeted letter can help cut through the legalese of a real estate sale. The struggling single mother who bought a home against the odds may want to pass the property to a woman in a similar situation. The handyman who renovated the property himself may like the idea of passing it to a do-it-yourselfer who’s going to continue his legacy.