6 ways for millennials to buy now

Prices in the core have jumped over 10% since the start of 2020. If you’re thinking about buying, there’s no better time than the present – waiting will just mean paying more, or being priced out of the market completely. So what does a city-loving millennial buyer have to do to get into a place in the 416? If cash is tight, think about using one (or all!) of these strategies:

1. Hit up mom and dad. A lot of first-timers turn to parents or family members for help, either in the form of a financial gift (or an off-the-books loan) or having them co-sign the loan. This is a tried-and-true tactic for a lot of Toronto buyers – parents who can swing it financially can be very helpful in getting their kids into the property market.

2. Don’t worry about having 20% down. Yes, if you have 20%, you don’t have to pay mortgage loan insurance, and you’ll pay less interest overall. But if you take months or years to put away that amount, condo prices will have gone up, costing you more than you would have saved. 5% down is plenty – no need to wait till you have more.

3. Get a job with a salary. I know, a lot of millennials aren’t in love with the idea of working for the man. It’s all about working for yourself, living the dream, I get it. But here’s the thing. When you’re self-employed, you write stuff off to bring down your net income. That’s great if you’re trying to pay less in taxes, but bad if you’re trying to qualify for a mortgage: if you look like you make less than you actually do, you won’t qualify for as big a loan.
   
   Plus, when you’re self-employed, lenders want to see two years of proven income. If you have a regular job, on the other hand, all you need to show is three months. So you can spend the next two years not writing things off (and paying a lot in taxes) or you can take the quick route and get a job with a salary. You can even do both for a few months. It’s not forever – if you want to quit once you’ve bought your place, you can.

4. Buy with a buddy. Buying one two-bedroom (average downtown price: $800K) is a heck of a lot cheaper than getting two one-bedrooms ($600K). If you share, each of you pays $400K. If the value goes up 10% a year, in three years that property will be worth over $1M, and you’ll both have enough equity to buy your own places.

5. Don’t worry about perfection. At this stage, getting into the market and starting to build equity is what counts. Don’t get fussed about size and layouts and getting into a specific neighbourhood. You don’t have to live there forever, just long enough to build the equity you need to buy something better. And in this no-signs-of-slowing-down market, that could be a matter of only a couple of years.

6. Buy pre-construction. Even though it’s a little more expensive than buying resale, pre-con has a stretched-out deposit structure (one to two years, usually, with anywhere from 5% to 20% deposit required), which means you have more time to save while getting into the market at today’s prices. And you can watch your yet-to-built condo appreciate, which is a very nice thing. For example, when Nobu was first released, it was around $1,000 a square foot – and everyone thought that was really expensive. Today, it’s not even finished yet, but things in the area are trading at $1,400 a square foot.
   
   Another thing about pre-con is that unlike buying resale, you can borrow your deposit – it doesn’t have to be saved outright. You can use a line of credit or borrow from your parents based on their line of credit. And then, while you wait for the unit to be built, you can pay off those debts so you’re in good shape to pay your mortgage, closing costs and maintenance fees once it’s ready.

Toronto real estate is expensive, I won’t argue with you there. And it will only get more so. To get in now, start small, get creative, ask for help wherever you can. And don’t worry about perfection – that can come later.