Keeping it real. It’s a good tagline, but that’s not why I use it. I’ve always been a straight shooter – I don’t know any other way to be. So, keeping it real…it’s tough out there. Interest rates have gone up nearly 217% in the last year, it’s harder to qualify for a mortgage, the cost of living is up, and while home prices have seen a correction (down 8% in Barrie and 12% in Simcoe County last month year over year), they’re still up overall.
Part of keeping it real is giving it to you straight and providing the whole picture, which means there’s good news and bad news. The bad news is, it’s harder to get into the housing market. The good news is, real estate is still the best investment out there. It’s the reason that the number one piece of advice I offer is to make home ownership a goal that you strategically and actively work towards. But in my experience, there are two types of people: those that fold under the weight of a challenge, and those that rise to it. I’m not saying it’s easy to find a path to homeownership in this climate – nothing worth doing or having ever is – but I am saying it’s possible
I’m so passionate about helping people navigate market conditions so they can be homeowners that I can’t seem to stop talking about it. The truth is, the longer you delay in formulating a plan, the harder it will be. The best time is ten, twenty, thirty, fifty years ago…but since there’s no time machine, the best time is now.
Here are six keeping it real strategies to help make home ownership a reality when it seems impossible. These may not be your first choice, but they are real options you should consider.
1. Creative Solution #1 – The Down Payment
Check out our blog on creative solutions to obtaining a down payment toward your first home, paying special attention to the Simcoe County Home Ownership Program…but only read it if you’re interested in free money.
2. Creative Solution #2 – Qualifying for a Mortgage
This scenario is ideal for two similarly-minded, single, young hard-working people, earning a similar income, who can’t qualify on their own but can do so together while sharing the cost of a house. I am a big believer in the value of putting sweat equity into your own life and future, so when my son wanted to own a home, I didn’t buy him one, I provided help and guidance. He was not able to qualify for a mortgage on his own, so he and a friend pooled their resources and together they were able to do it. Now they have their foot in the “real estate door” and an impressive amount of equity in the property they bought since the value of their home has doubled. If they choose to sell and buy again, they will be in a much stronger position financially.
- Make sure you’re each bringing equal value to the table in terms of financial investment.
- Make sure each party is earning enough to carry their own weight.
- Have a legal contract in place in case things go sideways.
3. Creative Solution #3 – “House Hacking”
This is the practice of finding ways to generate income with your home, usually with a multi-family property, but we’ll talk about that later. In this case, I’m talking about renting a portion of your home to lower your overall carrying costs. Back in your college or university days, you thought nothing of renting out a house with a bunch of friends while you worked towards a degree or diploma. This is a similar principle in that you may choose to rent out rooms to friends to help with cash flow because owning a home is expensive. Is it your first choice? Probably not, but this is usually only necessary for a season in your life until things inevitably change for the better and you can afford to live on your own if you choose to.
Financial institutions do not include rental income you earn from leasing a portion of your single-family dwelling when assessing your eligibility for a mortgage.
4. Creative Solution #4 – The “Granny” Suite
In this scenario, your tenant is a family member renting more than just a bedroom. This option straddles the line between house hacking and a legal second suite. The family member lives in a largely-separate unit – like a basement apartment – but there are some shared amenities such as a kitchen. A single or elderly family member may be the perfect tenant. This way, they’re not alone, you each still have some privacy, and you’re not house poor.
5. Creative Solution #5 – The Multi-Family Property
Although rental income from the above scenarios won’t be counted as personal income when qualifying for a mortgage in a single-family residence, it will if you’re buying a legal duplex or multi-family property. If you and a friend are two young, twenty-or-thirty-somethings earning, say, $60,000 each and are looking to buy a property, you should consider a multi-family investment where you may qualify for twice as much. Then you can live in one unit and rent the others, paying off your mortgage faster while sharing expenses and maintaining a good quality of life.
It’s important to understand the tax implications associated with this scenario. Consult a tax professional to learn about deductible expenses, reporting rental income, and any applicable tax breaks or incentives.
6. Creative Solution #6 – Get $30K from the County of Simcoe to Make a Secondary Suite
If you’d prefer to buy a single-family residence but would love to convert part of it into a legal secondary suite, there’s help. The Secondary Suites Program, funded by the County of Simcoe and Federal/Provincial governments, offers a 15-year forgivable loan of up to $30,000 toward the creation of secondary or garden suites. The goal of this program is to provide affordable housing for low-income families in Simcoe County so there are caps on the amount of rent you can charge. You may be wondering if it will be worth your while given that condition. Here are the maximum rents per market and unit type.
|Maximum Market Rents – INCLUDING UTILITIES
|SECONDARY SUITE LOCATION
|1 BEDROOM UNIT
|2 BEDROOM UNIT
|Bradford West Gwillimbury/New Tecumseth/ Adjala-Tosorontio
If you’d prefer to convert a living space into a legal secondary unit but charge full market-value rental rates, make sure the property you’re considering meets the zoning requirements. Get cosy with the Ontario building code and permit requirements needed to do this legally.
As Nathaniel Brettle, managing lawyer with Malo Pilley Lehman Brettle in Toronto says, “There’s more to it than just renting out a basement space for example. Residential leasing is very regulated. You need to make sure that the apartment you are renting is an entirely separate living space, with a bathroom and kitchen, and meets the required municipal and fire codes. If it’s in your basement for example, windows have to be large enough to extricate a person.”
In a perfect world, you’d all have a million dollars in the bank, no debt, a great job and could buy whatever kind of house you want. Unfortunately, we live in this world and not a perfect one, but you’d be amazed at what you can do with a little bit of hustle, a lot of patience, some good advice and a smart plan. You provide the hustle and patience, but we would be happy to help you with the rest. Apart from meeting with us, we can also connect you with mortgage experts and financial planners. Consultations are always free. We are genuinely here to help. Let’s make that dream of home ownership a reality!
CEO & Broker,
The Peggy Hill Team