Sometimes it happens to the best of Realtors. I hosted an open house 45 minutes from my office on the weekend and when I got home, I realized I had the key in my pocket. Early this morning you would have found me zipping up north to put the key back into the lockbox. On my way to the property, I listened to an interview that left me a bit perplexed. Why it was newsworthy is more how I was left feeling after listening to the interview. I recognized that there was some truth in it (like many articles or media interviews) but it did fall into “sensationalizing” something happening in Real Estate today, something that I have conversations about on a daily basis.

The interview was with the mayor of a small town in the Waterloo area. The mayor is 28 years old and the interview was how she could not afford to buy a home in her town, with a salary of $90,000. The article went on to share that the mayor lived at home with her parents and had a student loan from her university education. The average home in the article was purported as being $916,000.

Let’s dig in to see how accurate or misleading this interview turned out.

Wilmot is a very small town with a population of just over 20,000 and currently on realtor.ca there are no homes listed for sale. However, in the town of Hamburg, about 5 minutes away, there is a home currently listed for $520,000. Making a few assumptions about the profile of a Buyer for this home, and assuming a 10% down payment, a Buyer would need an approximate yearly income of around $102,000. This is based on paying full price for the home and having no debts.

What I found somewhat misleading was that the mayor being interviewed was commenting on a small piece of Ontario and giving a wide-ranging talk about how she would help to fix the issues on affordability. An issue that did not surface during the interview was that the mayor was effectively mid-way through a 4-year contract, and lenders may not look favourably on the applicant not having a guaranteed income past the end of their contract. When we hear an opinion on a topic like this interview, we can only listen and agree or disagree with the content, however, as a Real Estate broker with 4 decades of experience, I would offer the mayor some advice on how to become a homeowner.

Here are a few items we might discuss.

1. Living at home and making a great income will allow you to pay down your student loan and fast-track a down payment. In a 35% tax bracket, your take-home pay would be somewhere in the range of $58,000. Take the opportunity of living with your parents, avoiding a high rental lease to focus on your debts.
2. As you retire your student loan, ensure an amount goes into a savings account to ultimately add to a down payment. Seeing an account grow, even if it happens slowly will help keep you motivated to keep paying loans off and becoming debt free. The other option would be to open an RRSP plan and contribute. There are government programs that allow you to collapse an RRSP and use the investment as a down payment.
3. Consider purchasing a property with a co-borrower. Using the above example, 2 people purchasing a property would require each to have a downpayment of $26,000. In the event the Buyer wanted to get in prior to their student loan being paid off this would help her get into the market.
4. Meet with a Realtor and create a relationship and a “game plan.” The Realtor will help you determine if any other government programs are available to assist you in getting into your first home. (Like the land transfer tax rebate.)
5. Be flexible. Flexible on where you will end up living, what type of property you purchase and what features you need rather than want.
6. “Get your foot in the door.” Meaning, buy property. The first property we purchase tends to be a springboard to the next. Getting in is much more important than getting everything on your wish list.

Reflecting back on my career I can remember 2 home purchases that helped to get young people in their 20s into homes. The first was a client I met who had purchased a semi-detached home with a friend and lived in it for several years. I met them when the friend bought my client out and my client (having recently been engaged to be married) purchased a home with her fiancé using the money she made from the value of the semi-detached home increasing.

 The other example was personal – at the age of 24, I ended up purchasing a 3-bedroom condo that had an existing tenant. I moved out of my parent’s home and was renting a 1-bedroom flat at the time. I kept the condo for 2 years and ended up selling it, with the equity I had built up in the condo becoming the downpayment for a home. I lived in that home, along with a tenant in the basement until I was 29. The property became a rental property, and I kept it for a total of 8 years.

If you asked my client if she enjoyed her experience of sharing a home with a friend, I am guessing the answer would be “It was ok.” For me, I really wanted to be in my own home, and being a landlord and a tenant at the same time was not my desire but it was what I had to do to get my own space. Both of us sacrificed to get what we wanted, our own home.

My advice to the mayor is to do what you need to do to pay down your debts, and then (sounding like a broken record) do what you need to do to get your foot into the market. In time your first property will get you what you want. It takes time, but in the end, it pays off.

If you are stuck feeling like buying a property is not possible, I may be able to help you get a game plan in place to get your “foot in the door.” I can be reached at lindsay@buyselllove.ca or 905-743-5555.

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