Megann  Willson

Megann Willson

Real Estate Agent

HomeLife/Realty One Ltd., Brokerage

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Think long term, act short-term in today’s real estate market

What do I mean by this? It might sound counter intuitive. Isn’t the common wisdom to delay gratification to get something better in the long run? That’s certainly what many people have been taught. And it’s right. To a point. In a tight real-estate market like Toronto and other locations are experiencing now, it’s important not to lose sight of all the factors that help a property to become your most important personal investment. One of these is equity. Much like how taking a career break isn't just about lost salary, but also about losing seniority, or your place on the path to promotion, losing your ability to compound your equity can sometimes be impossible to recover.

Equity is the exact reason why homes have been such a great investment over the years. You need to pay for a roof over your head regardless, so why put money in the pocket of someone else, when it you can be investing in yourself and the aforementioned roof? The conundrum is this: in the past, people could buy a nice little starter home, and stay in it until they outgrew it (maybe never). What’s changed? Part of it is that what is defined as a starting point is far above where it used to be. Since it is so expensive, people are looking to get as much as they’ll ever want (and more), right out of the gate. Two bedrooms? Too few – what if we have kids? One bathroom? That will never do! We couldn’t possibly share, much less with guests and our children. Also, don’t forget space. We need thousands of square feet. And a yard. And more. But we’ll never afford all that. So we might as well give up.

What’s missing, these days? Part of what’s missing stems from those last couple of sentences. Wanting it now is part of the problem; the willingness to wait. There also seems to be  a lack of hope; the idea that if you choose something now, it can never, ever be changed for something else. Or on the negative side, it's possible there's a sense of entitlement, that we deserve exactly what we had at our parents' house, as if we were the ones who did all the hard work to build it. All I know is this. In a fast-growing market like ours, equity is growing faster than other less safe investments. That means that as you keep squirrelling away a down payment in a safe account, or GIC, or even the average RRSP, it isn’t growing as fast as that 20% you’ll need to buy a property. Especially if that’s a large, pricey property.

Now you could up and move to another part of the country. Fabulous if that’s a possibility for you. But what if it’s not? What if your career, your family situation, or something else means you can't go very far? What can you do?

Harness the power of equity by compromising. Get into the market any way you can. Buy a smaller property than you’d like. Your investment will still grow faster than putting that down payment into most of your other safe options. If you can live in it the property, more’s the better. Or if it truly is too small, continue to rent, and rent your purchase out to cover your payments, or part of them, at least. The best compromise is to buy the absolute minimum you can manage to live in for the next five years and to keep building from there. If you choose your community wisely, your investment may grow even faster than you thought. Plus, a lot can change in five years, and instead of being saddled with a huge home when you’d really rather spend your weekends travelling, you’ll have been able to enjoy your life a lot more. Alternately, becoming an investor while remaining a renter still means you're building another revenue stream for your future. Whether it's a tiny condo in the suburbs, or in a tall tower in the urban core, real estate is still a worthwhile and reliable place to put your money while you build and grow your fortune.

If you’ve ever worked with a coach, or if you’ve ever done any manifesting of your goals on your own, you’ll know that the final step is always to do the work. In this case, that work is to get into the market and work to build equity. You can do it, even if it isn't quite the way you had imagined. So look at those listings, and instead of trying to force fit your down payment to the property of your dreams, find a property that fits your down payment. If you’d like to talk about how, let’s chat.

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