Step 1: Finding a space
Most realtors would shout, location, location, location! But I disagree; its not because your new neighborhood is hip right now that youll be happy in it. My old neighborhood was really pretty but no restaurants were opened on weekends, so nightlife was practically nonexistent.
The location of your home should always be based on an objective list of requirements. Those who cant choose between two plates at a restaurant should get help from a friend. Like I previously mentioned, I misread myself when I assumed that I would never need a terrace. I really missed to BBQ.
I never choose a price range as a first requirement, as your location setting shouldnt be directly related.
First question: Country, Suburb or City
This is a tough one, because as someone from the countryside, I always missed living away from there. Thus when I decided to sell my loft, I wanted to have some money left to have a country home as well as a place in the city. I understand that might not be a choice for many, but in Montréal, having a condo in the city and a house in the country costs less than a house in the city.
As someone who never liked compromises in the first place, owning a condo in the city and a house in the country was the best choice for me.
Second question: Choosing your neighborhood
Im someone who likes to optimize his time, so I needed a neighborhood with a high walking factor. Other factors which influenced my choice of a neighborhood are:
· Metro stations
· High-end restaurants
· Farmers market
· 15 minutes max commute to my job
· Low crime index
· Gentrification potential
· Club scene
Most people with children would probably say, nice parks, good schools etc. But since Im single these were my main determining factors. Its important afterwards to go to potential neighborhoods and walk and the area many times to get a good feeling of the place. You might not know that a park is a junkie place at night if you didnt see it yourself.
Third question: House, townhouse, or condo?
Each of them has its advantage, if you have a big family; a three-bedroom condo could cost as much as a house. Myself I decided to go for a condo, as Im single and I dont need much space to be comfortable. I also dont need to care for yard work and such as my condo fees pay for these services and someone manages the workers.
Fourth question: House styling
For me its pretty simple, if its less than 80 years old, I dont find the place to have much charm nor character so Im not interested. Plus having an old place protects you from trends and the build quality of the frame is usually top notch. Many people paid big prices for McMansion but the resell value is just not there, as younger people find those houses to be really tacky. Same thing is happening with condo glass towers, I dont think they will age well into the future. Thats my opinion of course. I also prefer to be the first owner of the home, as Im pretty OCD about cleanliness in general.
Im probably in the minority, but I would never buy a house or condo built with a wooden frame. Wood works and creeks, many might find that charming, but on top of being a bigger fire hazard, wood isnt as resilient as either steel or concrete.
At this stage, it was clear that I wanted an old condo (loft) conversation within the city, limited to three potential neighborhoods.
Step 2: Planning your finances
I would suggest talking to your financial manager as soon as possible if you can. In Canada there are many mortgage brokers firms, but I never had really good service with them. They usually deal with people from the suburbs with standard requirements. I prefer dealing with directly with a banker who knows all about my financial issues. I had the same financial planner since I was a first year university student and it served me well so far.
For the first condo in my late teens (which I had paid the down payment with my student loans), I had a debt ratio of 41. You usually can get a mortgage if you are under 42 of Total Debt Service. I didnt know much at the time, but looking back, it was probably a big mistake, especially for my social life. I couldnt afford to eat at restaurants or go out much. I only had enough money to repay my debts. Eventually I got raises at work and the TDS fell, but the first years can be problematic, especially if something bad happens and you need money urgently.
Reasonably, I wouldnt go over 35 if you have a car or other vehicle, and over 30 if you want to have some kind of social life besides your home. As someone who likes to travel frequently, I fixed my TDS at 25. Gifts also counts towards lowering your TDS, so if you have generous parents (I didnt), it helps a lot.
Thus, by inverting formulas found on your banking website for TDS calculation, I had found my maximum price I would like to pay for new loft. In my case that is 425 000$ for my loft and a remainder of 550 000$ for my house (the land is already purchased for the house). This, obviously, includes money I had from my previous sales and the appreciation from those sales. Ive been working full time for 16 years now so I accumulated wealth during all of these years.
The next step is to already have a pre-approved mortgage by your bank. Especially if you have a lower TDS, it shouldnt be much of an issue if your credit score is good.
You think that because you got your pre-approved mortgage that you will actually get financing? Thats what I assumed too and it caused me many headaches afterwards. What I didnt know when I bought my first loft, is that historical building conversations are not covered by government mortgage insurances. In Canada, that means that you will need to give at least a 20% deposit. Since I intended to give only %10, it was quite a surprise. In that case I needed to find $50 000 in additional financing in less than a week, just before closing. Most mortgage brokers or realtors dont know that and assumed that I was just broke, which was insulting and irritating to say the least. My banker talked to the realtor and explained the situation and I opened a line of credit for the remainder. It still pushed my TBD to 35%, something I wasnt happy with.
Most banks wont lend you money for non-government insured buildings, even if you only ask for a 5% value mortgage. Other types of mortgages that most banks dont insure are undivided interest houses or buildings. A majority of buildings in Montréal in old neighborhoods fall under this, so most banks dont offer financing at all for these properties. This is a big surprise for many.
Also, most new constructions now ask for a 20% deposit at signature of the initial contract; you can always ask your bank for a line of credit in the meantime, as long as you can put the 5% down.
Step 3: Finding your new home
By searching Realtor listings or builders websites, you can find property for sales in your favored neighborhoods and by your maximum budget. Some people prefer to deal with a realtor, but I absolutely hate dealing with them; they usually dont know anything besides riding in their luxury cars and having a fake smile. Many times, I was the one who told them how to do their job and it pissed me off. For my previous loft, I had specifically put in my contract that I wanted a mortgage-insurable building, and at the end, the place I had bought wasnt and I had to fine additional financing last minute. Your success may vary and realtors might be upset to read it, but Ive yet to see the value added of using a realtor, and Ive used one 3 times.
Most realtors use sites like mls to search for your house. In my opinion, this is something you can do yourself. Many houses are not listed on mls and might be by owner type of sales. Specific websites are available by region; I know here duproprio and propriodirect are really popular ones. Higher end houses are usually not available on those websites though.
If youre looking for new constructions, many cities have house and homes shows where promoters present their new projets. There are also open house days where you can go see to the demo unit directly.
If youre looking for a piece of land to build your new home, they can be found cheaper on websites like eBay, craigslist or Kijiji than on MLS. This is how I found my piece of land for my future house. Make sure you do an environmental assessment of the land before closing though. It took 5 offers before finding and unpolluted piece of land, and I had to buy in a different area altogether.
At this point you should come up with a list of all properties of potential interest for you. If you have significant other, I would suggest coming up with a list of common requirements before visiting. I would even suggest that to leave your significant other at home if of the emotional kind, and bring a friend from the construction industry. At this stage, it is not about the colour of the kitchen but the build quality and layout of the properties youre looking at.
Dont be discouraged, it can take dozens of visits before finding a house that you could call home. I find that people expect too much. A house was built for someone elses specifications, it is normal that it doesnt fit all your needs. A 80/20 ratio is usually what I would recommend in looking into. That means, a house that fits your style 80% and only needs 20% renovations is a good potential buy. But make sure, beforehand, that you have the budget for these renovations. Also, if a house interests you, visit it three times as you were dating. As the first date you might thing you have found the love of your life, but at the third date you discover that youre really incompatible.
Concerning my new place to be, as Im not someone who compromises easily, it was important for me to have a contractor that would let me be active in the construction process as to have that 80/20 ratio. Bigger contractors usually only give you standard finishings with no possibility of having anything customized. That might be good for a first owner but for me, my home needs to fit my lifestyle 100%. For me, there were 4 potential buildings under renovation that fit my initial list of requirements. For many, that list could contain a pool, two parking spaces etc. My other requirements were to have two indoor parking spaces, a private terrace, a brick wall, concrete floors, natural gaz, industrial windows and absolutely no engineering floors/carpet (you would be surprised how many condos still have those).
As one of my friend worked for one of these 4 contractors, he told me that I should meet the promoters to see if there were interested in doing custom work, which I did. I finally managed to put in my contract a clause which allowed me to do whatever I wanted for my unit, including selecting the potential space in the building. Im someone that needs to be hands on in the process as you can definitely save on costs by doing most of the work yourself, but then again, this is not for everybody. At this stage I had thus found my new place, and agreed on which work would be handled by the promoter and which I would do myself.
