by Erica Smith and Lorena Magallanes
The Condo Chicks
It’s hard to believe such a tech-savvy generation could make any mistakes, but when it comes to owning property there are a few rookie oversights that these first-time homebuyers often make. With growing student loans and a high unemployment rate, millennials have a lot to consider when entering the real estate market.
Navigating the landscape for a first-time homebuyer can be challenging for anyone, especially young Canadians new to the real estate game. When taking into consideration location and a slew of other details without prior familiarity with the ins and outs of property ownership, missteps are bound to happen.
As seasoned real estate professionals, we have learned that many millennials make some very common mistakes, but it’s not their fault.
For many, renting may seem like the easier option, and much more appealing, especially for those thinking short term, but there are many benefits to purchasing and getting into the real estate landscape early on. Compiling some of the most common mistakes millennials make, we hope to empower young new entrants to the housing market get the property of their dream and set the stage for future purchases. With the following tips, achieving your housing goals at any age can become a reality.
Happy house and condo hunting!
Not thinking long term
For many millennials, it’s hard to picture 40 years down the line when they’re still starting to map out their career and long-term plans. Not knowing what the future holds is a key factor for not wanting to lock oneself into long-term commitments. Because of this they often purchase small condos as a short-term investment. However, this can be challenging for first-time property owners, as this is an oversaturated space and the competition is thick with investors who are happy to pay in cash with little stipulations.
Seeking out hotspots
Millennials want to be where the action is – after all, the downtown core is usually the liveliest. The problem is that these areas may be unaffordable and cause millennials to stretch themselves thin, maxing out their budget when purchasing. Where there is a great deal of competition, you’ll usually find multiple offers. Our recommendation: try casting a bigger catchment area. This may put you slightly outside your preferred area, but still close enough to the action and within budget to be able to enjoy it.
Whether it’s paying back student loans or the shock of being cut off from parents, it’s inevitable that many young people find themselves in debt. As a result, renting often seems to be the better choice in terms of saving money versus a hefty down payment associated with owning. Canadian housing prices, especially in Toronto and Vancouver, are increasingly rising at a faster rate than most people can save money for. If millennials do not have 20 per cent down on hand, they should still consider putting 5 to 15 per cent down instead. If they pay the added insurance cost now, it may be beneficial in the long run.
Choosing a property based on convenience
It’s only natural to want and look for a space that suits your work/play lifestyle – that’s why so many millennials purchase downtown condos instead of houses in the suburbs. But it shouldn’t be overlooked that houses appreciate at a faster rate than condos. If millennials have the down payment, or are in a position to get it with a bit of support, they should reconsider that home in the sky for one with more space to offer.
Forgetting about homeownership emergency costs
When receiving bank approval, most people —millennials in particular — believe the amount of a bank loan equals what you should be able to afford. But you need to account for unexpected costs that almost always arise (i.e. homeownership emergency costs) when you are totalling things up. For instance, in the event a furnace breaks down, a flood occurs or a pipe bursts, homebuyers should have savings tucked away to deal with these issues. Spending your max budget, even if approved by the bank, is never a good idea.
Relying on technology
We often turn to Google to answer almost every question. Although a great source to compare the sale price of a new pair of shoes, it may not be the best option when searching for properties. With any real estate purchase, issues and questions will almost always arise – ones that a Google search may not be able to answer accurately. A qualified real estate agent will always be your best resource. They will have access to a list of properties that you may not be able to find online, as well as a wider understanding of the market, what’s trending, what will be trending and what you should be spending.
Biting off more than they can chew
HGTV shows have made DIY renos and home improvements seem simple enough for anyone to tackle with ease. The quick flip (short-term investment) seems like an easy way to make a lot of money, fast. But the reality s that home renovations should be left to the pros. At the end of the day, potential homebuyers can always sense a quick reno job from a quality one. Gutting a house and rebuilding is a lot harder than most people think, and unless you have experience, time and the funds to do it right, it shouldn’t be attempted.
Erica Smith and Lorena Magallanes lead a team of creative, innovative and motivated professional realtors who are passionate about real estate. Find out more at condochicks.com