Is it better to keep renting and save for your “dream” home, or buy something that’s not quite your dream now? If you’ve got enough for a down payment (even if it’s for something really small or in a location you don’t love), decent credit and a stable job, my answer will ALWAYS be don’t wait. Buy something now!
The why of it is simple: if you keep renting so you can afford the “perfect” place, or trying to time the market, you’re wasting time – and handing more of your money over to someone else. If you buy, you’re putting most of that money right back into your own pocket. AND taking advantage of appreciation over time.
“But I don’t have enough to buy what I want.”
Your first place doesn’t have to be your forever home. Buy whatever you can afford now instead of waiting, then move up to something better in a couple of years. Or buy something with a friend or family member. Just get into the market. The equity and appreciation from this first place is what will enable you to buy something that’s closer to what you want. And it will get you there SO much faster than trying to save enough for that “perfect” property while you rent.
Real estate is one of the safest places to put your money. Over the last 100 years, GTA prices have basically doubled every 10 years…history is our best teacher. So even if prices drop in the short term, you’ll still be further ahead than if you were renting. You’ll get back what you put in, even if you don’t get much appreciation. But if you rent, you get ZERO back. And even if prices don’t appreciate over the course of 5 years (which is unlikely), you’ve still been paying down your principal – or having a tenant do it for you.
Can’t afford that house you really want right now? Buy a condo. Don’t have enough for a 2-bedroom? Get a 1-bedroom. If that’s still too much, go for a studio. And if a studio downtown is out of your reach, buy one in a less expensive neighborhood. There are always options.
You don’t have to live there: buy it and rent it out to someone else.
If it’s too small for you or not in a location you like, that’s ok. You can stay in your rental or live with your family for a while: your renter will be paying your mortgage as you build equity and let the property appreciate. I recently helped clients buy a condo in North York because that’s where they could afford to buy. They’re renting it out to someone else while they live in their leased unit downtown. In a few years, their plan is to sell it and buy something closer to downtown.
I have clients that have done this time and time again – and have been able to leverage this strategy to buy their dream homes within 10 years. It’s a formula that works, but it takes time.
Still can’t afford to buy something right now?
When you’re spending a ton on rent every month, I get it – saving is hard. Or maybe you’re a freelancer who doesn’t have a steady income. Or you have bad credit. But you still have options.
If you can’t get a mortgage from a traditional lender, talk to a mortgage broker about private financing. Yes, you’ll pay more interest, but you’ll still be further ahead than if you keep renting.
Get a co-signer.
Ask your family for help with the down payment – whether that’s a loan, a gift, or a free place to stay while you save.
You could also consider buying with a partner – go in with a sibling or a friend. They can live with you or not, but you’ll be splitting the costs, and ultimately, the profits.
One final thing to remember about renting: your landlord is in charge
Unless you’re living in a purpose-built rental building, you’re probably renting from an investor. And your landlord can decide to sell at any time, or move family members into the unit. If that happens, you’ll have 60 days to find another place to live. (Even if you think you’re in the perfect situation, you’re vulnerable.) And if you’re living in a rented condo that was built after November 2018, you can’t count on rent control: your landlord can raise your rent as much as they want.
Ultimately, my advice is buy if you can. Buy whatever you can. Lower your expectations, get creative and put your money into something. It’ll get you so much further ahead than renting.
Need help finding a neighbourhood or unit style you can swing on your budget? Get in touch – I love helping first-time buyers get in on that first rung of the property ladder!
About Sean Miller
Sean is Property.ca's #1 REALTOR® for 2021, with the drive and expertise to guide you through one of the most important financial decisions you’ll ever make. Whether you're a first-time buyer, a seasoned seller, are new to the Toronto market or are looking for a great investment, he makes the experience as stress-free as possible, quickly assessing your needs and offering a full range of options that fit with your lifestyle and budget. Navigating the GTA market is his specialty, and stellar customer service and deep market expertise are his calling cards. He is always ready to go the distance to help clients make the right choice, at the right time and the right price.