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June 23, 2011, 6:00 am

When Buying a Home is the Best Option

by: MD    Category: Properties

The other day I released my first manual on deciding if you should buy or rent a home post-college. Why the need for this? I feel that young professionals are often misguided when it comes to the idea of home ownership. There are too many myths that exist when it comes to both renting and owning. Owning is often viewed as the best investment you can make. On the other hand, renting is seen as “throwing money away.” I put up a bunch of guest posts this week on the decision to see if you should buy a home or rent one in your 20s. Today I wanted to take the side of home ownership.

Let’s look at when buying a home is a better option over choosing to rent a place out:

You plan on settling down.

If you’re ready to settle down with your career and with life, a home can give you the stability that you need. Renting provides a great sense of flexibility. If you want flexibility, then renting is probably in your best interest. When you’re ready to settle down, a home purchase can help you get grounded. If you’ve found work in the career/company of your choice, you also might be ready to settle down. There are many instances where you can find yourself planning to settle down. I recommend a first home purchase at this point.

You’re starting a family.

This is the most common instance where we find ourselves settling down. For those of you with a baby on the way or looking to start a family in the short term future, you may want to purchase a home in a community where you would want to raise your kids. Right before I was born, my parents purchased the home that I lived in for 22 years. Starting a family can be the perfect excuse to look into that spacey home in that calm community.

You know where you want to live.

The problem with many young professionals is that a primary residence is often viewed as an investment. The problem with this thinking is that real estate is not the greatest investment. Aside from all of the taxes and expenses that go along with home ownership, you still need to hope that your home appreciates in value. You must also factor in the rate of inflation. Buying a home for the sake of a “great investment” isn’t the best option. If you want to settle down and you know exactly where you want to live for the long term future, you’re ready to buy your first home.

Looking for responsibility.

As strange as it sounds, many of us young people find it a challenge to save money for no reason. Saving money without an end goal can get either really boring or you might just spend the money on random purchases that come up along the way. I don’t want to say that a home is a “forced savings tool,” but it’s a great reason for many of us to start saving up money.

A certain sense of pride comes along with owning your own place. You’ll find yourself taking pride in the presentation of your place and the responsibility that goes along with maintaining a home. Buying your own place can fill that gap that you feel as a 20-something living at home with no real responsibilities.

You plan on renting out space.

I’ve noticed that a few acquaintances have bought a home so that they can rent out a portion of the space while building their equity. The idea here is that you own the place, live in one of the units, and rent out the rest of the place. I see this as a great opportunity for a young couple looking to get their life started. You purchase a home and get a taste of life as a landlord in case you ever planning on buying a rental property.

Those are the instances that I could think of where you would be better off owning a home instead of renting one out. Did I miss any other times when you’re better off with owning? Please share with us.

(photo credit: owlhere)

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February 26, 2011, 10:54 am

Rent Vs Buy a House (Infographic) For The Weekend

by: The Financial Blogger    Category: Properties

Hey guys,

I saw that on Mint and I thought of sharing this with you. It’s a great infographic on the decision to rent or buy a house. Enjoy!

Provided by Mint.com

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January 18, 2011, 5:00 am

Wanna Buy a Condo in Florida?

by: The Financial Blogger    Category: Properties

buy condo in florida

There is snow, you can go see the Montreal Canadiens for nothing,  women are beautiful (alright, there are good looking men too 😉 ) and our Canadian Dollar worth more than the US currency. I think that I should ask my question differently: Who would not want to have a condo in Florida? Many of my clients bought a condo in Florida since 2008 and one of my friends did it last year. It appeared to be a pretty good deal since 2 condos in the same tower were sold last fall for 40% more than what he paid. But wait, things are far from being perfect in the Capital of the sun. Before you make a move, I’d suggest you do your homework as buying a condo in Florida is not the same thing as buying a condo in Canada ;-0.
Financial situation of the condo association

One of the key aspects to look at is the financial situation of the condo association. Why? Because some condo associations in Florida have major financial problems! Imagine a 30 condo tower with a vacancy rate of 25% (yup, there are a lot of people leaving their condos since they can’t pay for them anymore). I’m sure you can imagine how your condo fees could be hiked up to a ridiculous amount to compensate for the lack of paying owners.
Type of insurance coverage in place

If you are about to invest in Florida, you want to make sure that your investment is covered. We don’t have many hurricanes in Canada, but things are different down south. Depending on the area, it is important to look at the insurance coverage offered on your property along with what the condo association has decided to go with (don’t forget, you are not alone in this deal, the condo association plays a big role).
How many units are for sale in the building

Here again, the number of units for sale (or owned by the bank) could be a deciding factor when making your choice. If there are many units for sale, you will surely get a good price for your condo. However, it also means that your condo value will take more time to grow. And we are not talking about the chances of having squatters as well…
Can you rent out the place?

Your plans are made; you did your research carefully, you are well insured and you found a super condo in a great location. On top of it, you are going to rent your condo in Florida to your friends for half of the year… Oh wait! Can you rent out your condo? This should be part of your list of questions to answer while shopping for a condo. Some condo associations only allow a specific number of units for rental purposes and yours might not be part of the lucky owners.

What happens if you die?

Well, that’s an easy one; I have a Canadian will and the condo I just bought will go to my wife or kids. Watch out! The State of Florida might not recognize your Canadian will or might cause some trouble (well, cause trouble for the liquidator of your estate 😉 ) regarding the transfer of the condo. In order to play it safe, you are better off creating a US will as well. Then, you will be fully covered.
Get professional help


If you don’t know much about Florida and you plan on buying a condo there, you will need professional help. Ask your bank if they have a branch there that can hook you up with the following professionals for a successful transaction:

– Real Estate Agent

– Banker

– Property Inspector

– Closing agent / Lawyer

– etc.

Your bank should be able to help you out and guide you through the buying process in Florida. It might cost a few thousand more but you are better to be safe than sorry!

Do you own a condo in Florida? I’d be curious to read your story!

EDIT: I have found an article written by Ellen Roseman from the Toronto Star on buying condo in Florida and the effect of exchange rate. interesting ;-D

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September 15, 2010, 9:58 am

Canadian Housing Market Bubble to Burst… Really?

by: The Financial Blogger    Category: Properties

 

I rarely do this, in fact, I never write a second post during the day unless there is a modification in the interest rate. But today, I just read an article about the Canadian housing market and I was thinking of all your reaction towards my article on the (possible) Canadian Housing Market Bubble.

According to the CREA (Canadian Real Estate Association), housing sales went up in August by 4.1%. Interesting enough, the activity in both Ontario and British Columbia (2 hot Canadian Housing market) was in good shape.

So housing prices are slightly going up and sales are following the same trend. Interesting enough in a market where we forecast interest rate hikes, isn’t?

I don’t think we will see the Canadian housing market going up like crazy but I think that reaching a balance between sellers and buyers is more likely to happen. Looking forward to the end of 2010, I think the housing market will continue to cool off slightly and smoothly avoiding the abyss of a bubble burst.

 

What is your take on those new housing stats?

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August 10, 2010, 5:00 am

Next Bubble To Collapse; The Canadian Housing Market?

by: The Financial Blogger    Category: Properties


To burst or not to burst, that is the question! I recently had this conversation about the supposed housing bubble in Canada with my best friend (and partner in my online adventure). He was explaining that he believed that there was a housing bubble in Canada and that it wasn’t normal that the US housing market tumbled while ours barely bent its growth curve for a few months.

I must admit that he is a big follower of the US economy and while I think that Canada is in a enviable economic position for the next 10 years (solid banks, solid economy and full of natural resources).

In my opinion, we don’t have a housing bubble in Canada since our mortgage criteria are way stricter than our southern neighbours. Therefore, both the CHMC and Canadians banks are following severe debt servicing ratio guidelines to the dot (trust me, trying to qualify for a mortgage when you are 1% over the accepted TDSR is becoming a challenge these days!).

Another point to take into consideration, we never had 100% mortgages, interest only mortgages or 125% mortgages on our properties. In fact, the Canadian Government also forced new buyers to have at least 5% cash down and they can’t count on a 40 year amortization anymore. This is why I think our housing market is under control.

On the other hand, my friend is also strong willed and wanted to prove his point. This is why he forwarded me the following graph:

As you can see, this is the indicator of both the US and Canadian housing markets. They both start at 100 points and fluctuate according to the average price of houses over time. This means that when the index reaches 200 points, a house that used to sell for 100K back in 2000 will now sell for 200K.

The 2 indices are the most used references to demonstrate housing prices over time. They are well known and I can’t question the validity of the data.

What the graph shows is that the US market hit a summit back in 2006 at almost 210 points and then suffered a huge drop back to 140-150 points in 2010.

What concerns me about this graph is the Canadian Housing index. As you can see, we are dangerously approaching the 210 points mark as we are around 200 points right now.

While I still don’t believe that we will enter into housing down market, I am a bit concerned about this graph. One thing is for sure, I am pretty happy to have bought my house since I think I will live in it for a while. In fact, if you don’t expect to sell your house in the next 5 years, you don’t really have to care about a housing bubble that may burst, right?

What are your thoughts about the Canadian housing market?

What will happen when the housing market reaches the US peak? Will it tumble? Is our economy is built on the same housing bubble model as the US was?

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