VIPBDS-The Finale!
To start off my “investment answers” month I decided to write about the final chapter of my Vancouver Investment Buying Disorder Syndrome saga. As you may know from my other VIPBDS blogs I have been caught up in the chaotic experience of finding a place to purchase as an investment for my parents.
After finding an agent and figuring out what type of property I wanted I finally found a beautiful apartment that I wanted to buy. We put an offer in on the place and negotiated the price so that we could get the Canadian Property Transfer Tax back. There was a tax of approx. $8000 when I bought my property. If you are a first time buyer however, you can get the Property Transfer Tax back. Also, if you are buying new you may get a GST rebate.
Rule #5
Save money where you can! There are lots of ways to save money on your investment if you buy sensibly. For example, if your parents buy a place in your name they can save on the tax because it will be your first property. One way that I saved money is by giving the previous tenants an extra few days to move out after I paid for the place.
Rule #6
Do your research! Even though you may love a place you need to make sure that it will be a good investment. In order to find out if it will be a good investment you have to take into account things like:
• area
• price per square foot
• comparisons between similar properties
Now your agent will do most of this research but it won’t hurt for you to do it too. Prices in Vancouver are insane right now but like in any real estate investment what matters much more than the price is what others are paying for similar units. If people are buying similar places for that price then you should be in good shape.
Investing in real estate is a tricky matter but it can really work out if you work hard at doing it right, Some people argue that there are better investments than property and they might be right but when I think about how much I have learned and gotten out of my investment it was well worth it to go through all of the pains of VIPBDS. So don’t be afraid to go out there and take on the real estate investment market as soon as you can because before you know it you may be chilling in your new place living it up like a rock star.
Just to let you know this is a continuation of the real estate saga that I have been going through here in
Chapter 2 “The Work and the Glory”
I cannot emphasize enough how good it felt to finally have an agent working for me. My agent would email me listings based on the criteria I had given him and then all I would have to do is reply and let him know which ones I wanted to see and when. After that, he would make all the calls and schedule an effective and efficient block of appointments in a row so that I could get the most out of my time. For more info about how having an agent helps check out: www.howrealtorshelp.ca
When we visited units, the agents that were selling them didn't treat me like they were hawks anymore because my agent now served as a mediator. I was able to gain more reliable information as my agent asked the right questions and noticed problems with the unit, its location or the price that I would have had no idea about before.
This honeymoon of having an agent quickly dissipated as the agent began asking me questions like “how much do you really want to spend?”, “what location do you want?” and “when are you looking to buy?” Yes, I know that these are very basic questions but you have to understand that my parents called me and told me that they were “looking to buy” and while I had a general idea of what they wanted, it was never easy for me to answer these questions.
Rule #3
Know what you want! I thought that by looking at lots of properties I would get to know what it was that we needed. This worked in the end because it gave me an idea for the market but it was frustrating when I realized that the four bedroom houses that I was looking at for a month weren’t the right choice for us. I do not recommend doing things backwards like I did.
Instead, talk to your parents and tell them you would be happy to help them find a place but that they need to sit down together and agree on price, general location, size and time period. Ask them to do some calculations in relation to finance so that you have a general idea of what your family can handle realistically. Also tell them to contact the bank and begin a pre-approval process for a mortgage in the price you have discussed. Trust me, if you know what you want it will make a world of difference in fighting off VIPBDS and save you hours!
Finally, two months after that first phone call with my parents, I started the real estate search. Can you imagine how frustrating it was for me to look back at two months and hundreds of hours that I had spent on places that didn’t even suit our family’s needs? Don’t let VIPBDS get the best of you like it did to me because for those months it consumed my mind, my time and my life. I even neglected the girlfriend I had at that time (forgive me babe).
Finally, I found a place that I liked and met our needs. It was the right size and had this “wow factor” view of the north shore mountains (oh how I love BC). So we decided to make an offer but it was rejected as there were many offers and the seller wanted an unreasonable amount of money. Despite this I was still tempted to buy the place at the higher price.
Rule #4
Don’t get emotionally attached! You must always remember that you are buying the place for investment and part of VIPBDS is getting distracted by emotions and buying without thinking. Although I say this, one must take into account that if I felt that way about the apartment and got emotionally attached, maybe someone else will too and it will be easy to sell or rent.
Despite all of this frustration that I was experiencing it was manageable because I knew I was closer to obtaining my goal. Eventually, we did find a place and I felt an enormous amount of relief. What I didn’t know was that perhaps the most trying part of VIPBDS would be the actual purchase of the property itself. The saga continues...
Boxes littered the ground of my 17th-floor apartment as I arrived home late one night last week. For several days, I’d been staying at school until the early morning hours trying to get a documentary finished. As you might imagine, I wasn’t in the happiest of moods before I walked through the front door that night—and as I crossed the threshold, my sulky five a.m. mood sank even lower.
Truth is, I’ve never really moved before. I moved in and out of residence for two years, but I don’t count that because I always went back to my real home. When I “moved” into this apartment, it didn’t feel like moving at all because I’ve managed to keep root in both my rooms.
But this time is different. I really feel like I’m leaving somewhere. Seeing those big brown boxes in the middle of the room forced me to think about it.
I suppose I should consider myself lucky because I have two roommates who have been doing the work. I’m dreading all the upcoming cleaning, let alone all the packing.
It’s easy to forget that moving can cost you. Tenants have to leave the place pretty much the way they found it. Our building requires us to fill in any holes that we’ve put in the wall and paint over it. They also want us to clean the carpet—and provide proof that we’ve done so. We even have to put a deposit down on the elevator. They also offer cleaning services if we’re willing to pay for it.
My roommates are moving across the country, so they’re trying to sell a lot of their stuff. Posters have been put up in the lobby of our building and — to my surprise — they’ve worked. They’ve also posted things on craigslist and Facebook’s Marketplace. I’ve also heard some great things about kijiji, which is eBay’s answer to online classifieds sites. It breaks up
I tried to find some classified sites that were strictly for college and university students, but I could only find American sites. Does anyone know if these exist for Canadians?
My cable/internet company needed a month’s notice that we’d be moving. Check your provider’s policy because, even if you love TV as much as I do, you don’t want to have to pay for it if you’re not using it. If you’ve got a landline telephone number, you’re going to have to get that changed, too.
The boxes have been cleared to the side and you can once again maneuver your way around the place. Although, I can only imagine what kind of mess will be in my way in the coming weeks.
For now, I’ll just remember the place during better times…
The Apartment in its prime
On its way out
My dollars are being washed away in the dishwasher.
About a month and a half ago, my roommates and I heard an annoying clanging coming from our dishwasher. I know, “A dishwasher? And you’re a student?”
The short answer is yes. The long answer is we pay for it— in our not-so-cheap-Toronto rent.
Before anything caused the dishwasher to break, we filled out a maintenance report, as we had done before with any previous concerns. Because the property is not ours, we should not attempt to fix any of their property (this was confirmed by someone who works for the company that owns my building). Usually, a maintenance repair person appears at our door a day or so later and soon thereafter the problem is solved.
This time, someone from the front desk come knocking, along with someone who appeared to be another maintenance worker.
When the dishwasher was opened, it was discovered that a piece of our vegetable steamer had fallen down under the spray arms.
Nothing in the dishwasher was broken nor needed repair. Our minds—and ears—were put to ease.
A week ago we got an invoice in our mailbox. My apartment building wants $70—the cost to pay for the “dishwasher specialist” to come in and look at our machine.
I couldn’t believe it.
When I questioned them on this fee, I was told that because the object was “foreign” to the dishwasher, it was our responsibility to pay for the repair.
Foreign? A vegetable steamer goes in the dishwasher.
Repair? Nothing was repaired. I would have gone into the dishwasher if I knew it was going to save me $70. But, I was under the impression that it was my landlord’s responsibility to look into the problem and, ultimately, not my right to repair their property.
A couple of posts ago I calculated that my roommates and I have paid a total of $36,000 in rent to date. We haven’t been a problem for the building on a single occasion. To be honest, I’m a little offended that this fee couldn’t have been absorbed by my apartment building. I have tried to get the fee revoked, emphasizing that we were merely being “proactive in our efforts to prevent damage” (Nice, eh? I managed to come up with that one during one of my discussions), but my defense fell flat.
I also asked if tenants could be warned of the possibility of such a fee in the future. I was told that this would also be difficult because, until they start the process, they don’t know if a fee will be in place.
Sadly, the fee remains and I’m a couple bucks poorer.
This, though, has sparked an interest in renter rights. They vary from province to province. While I hate to be Ontario-centric, this provincial site outlined some rules for me. I’m sure there are similar sites across the country.
Apartment hunters can also read reviews online about apartments they’re looking into. This site isn’t Ontario-centric and seems to have lots of apartment reviews. Mine was listed and, so too, is a new post from me.
I’m not saying my apartment is entirely a terrible place to live (my review wasn’t all that bad). I’m just a little frustrated…
How about any of you? Any frustrating fees?
On my last blog entry, I got a comment about the appropriateness of mortgage for students. Some good points were raised by questioning the option of giving students mortgages and, moreover, the debt risk someone may be putting him or herself in. That’s actually why I wanted to speak to someone about this in the first place.
I got back to Bernice with the concerns and she stressed the importance of sitting down with a mortgage specialist. She says that if students want to get themselves a mortgage, it’s something the bank is there to talk with about. The specialist’s advice may, in fact, be that this isn’t the right time to buy a home, but a plan can be put in place to get you into the right position. “Every circumstance and situation is different- we simply want to highlight options,” she told me. She stressed that “purchasing with 100% financing” isn’t necessarily the best option, but nevertheless one that is available today.
When I wrote about co-investment opportunities, I was drawing on my own personal experience. I suggested that at one time I might have wanted to look into getting a mortgage with my roommates. When I asked Bernice that, I was surprised that it was an option the bank was willing to look at and that it was called “co-investment”. There are many different co-investment possibilities and one, of course, is the parent-child (student) possibility. This is a possibility that a student may want to pursue.
When I followed up with Bernice, she reminded me that there are many different levels of “students” in the market. Some may have part-time or even full-time jobs that could support a mortgage. “Depending on their personal circumstances,” she said, “their level of qualification and “readiness” for homeownership could be very different.”
When I was growing up, I really thought I could live in this kind of house. It would have the butlers, the five-car garage, the indoor pool and the slide that led from my bedroom to the indoor pool. You know, pretty standard stuff.
Now, I’m realizing I’m probably going to have to think just a little smaller.
But it’s cool. I don’t really need things like a bowling alley.
Last week, I told you about my friend who didn’t know whether he should rent or buy his next living space. I’ve been hearing that this is a question that a lot of people my age are struggling with.
The Mortgage Question
I had the opportunity to speak with Bernice Dunsby. She’s RBC’s Senior Manager of Client Acquisition, Home Equity. Basically, she knows Mortgages. She assures me that purchasing a home (or apartment or condo or loft, etc.) is still a stable investment in today’s market.
“Over the past ten years, there’s been a 65% increase in the value of homes,” she says. “If you think about increase value, does it mean a good investment? Yes.”
I also asked Bernice about whether we Canadians should be worried about the struggling housing market south of the border. She insists that the Canadian markets are separate than those in the U.S. and that when it comes to home purchases, the intention to buy is still very strong in our country.
I wanted to know whether it was even a possibility to for a University student to think about signing him or herself up for a mortgage.
It’s Possible
Even individuals with little income can qualify for mortgages nowadays. “In the past, banks required a minimum of 20% on the down payment of a mortgage,” Bernice tells me, “but today you can own a home with no money down. You can literally purchase with no down payment.”
While this may seem like a gift, Bernice heeds warning that 'no money down' means you are financing more over the term of the mortgage, which means it's going to cost you more in the long run. But, that may be ok depending on the way you look at it: when you start paying off your mortgage, you build equity. Equity is the value of your home in the market, less what you owe in mortgage payments. So, every time you make a payment, your house increases in value because there's less money owing on it.
But alone?
I talked last week about wishing I had possibly got a mortgage with my current roommates. I was surprised to hear that this is something the bank doesn’t entirely frown upon.
“There’s always the option of co-investment,” Bernice says.
Co-investment can mean a mortgage with friends—or with family. Just make sure everyone is on the same track, though… no one wants a financial feud down the road.
Bernice stresses that the most important thing a person can do is meet with a Mortgage Specialist. They will sit down with you and pre-approve you for a mortgage. This means they’ll help you determine what you can afford based on your circumstances that day. There's no obligation to buy after this meeting.
“The beauty of mortgage specialists is you don’t have to go see them,” she says. “They’ll go see you—at your office, at school, at home, anywhere.”
And if you’re a little nervous about meeting with a specialist just yet, RBC has an online self-help pre-approval tool to assist you in determining whether that mortgage is just a dream.
Looking more closely hat the price of that small Toronto house, I’m thinking I just may need to look into some more realistic housing options.
Bernice, can I still get a mortgage for something like that?
“We want to buy a house in Vancouver”
There I was sitting in my little basement suite bedroom with the window thats no bigger than my head when I heard the words come out of my fathers mouth.
“We are thinking of getting a place that you could live in a rent out to students, how does that sound to you? We want you to start looking for a place that we can buy when we come to town next month.”
At the time it sounded like music to my ears but what I didn’t know was that for the next two months, my life would be sabotaged by Vancouver Investment Property Buying Disorder Syndrome. VIPBDS has consumed much of the lower mainland here and people of all ages, backgrounds and wealth are experiencing it.
VIPBDS is something I thought I would never have to go through. I thought that I would spend my entire university life renting and living in student deprivation. That is how it all happens though, at the onset of the disease your mind starts to wonder and you begin to imagine what life would be like when you “own” in Vancouver. I looked around my room and began daydreaming about what it would be like to have things like a closet, carpet and a window! Once the day dream stopped I knew what I wanted. I knew what my goal was. I knew that I was going to put everything I had into finding the nicest, best, coolest, best priced investment property in Vancouver for my parents to buy and for me to live in. I was on a mission and I was going to succeed! And thus, I entered the first stage of VIPBDS...
Chapter 1 “Here, take my card...”
Stage one of VIPBDS is about finding. Its about that obsession to find that consumes all of its victims. It causes its victims to bookmark MLS search and creep it more than they do their friends Facebook pages. Its victims spend hours and hours searching through listings, comparing prices, searching layouts and googling locations. Before they fall asleep at night their minds race through all the places the have seen and what they will see. The hours just fly by as its victims try to find the place that will help them get in on the market.
I became sooo ecstatic about finding a place that I even began to neglect other things that were priorities to me before. I think I did this because of the intense sense of urgency that automatically comes with VIPBDS. I truly felt so rushed to find the place that would make my parents happy and that would be a good use of their money. Also, since my parents were coming to town for only a week I felt as though I had to rush to make this huge decision work within the small window of time we had.
Rule #1 (for fighting VIPBDS)
Dont rush! Your buying a house for goodness sake! Schedule a reasonable amount of time every day to spend searching. Don’t try and do everything at once! Buying a house is a longer process than most students think and you don’t want to spend to much time on it an neglect other things like school (blah).
So now that I had found some places, I needed to see them because I was trying to make a list of places my parents could se when they were in town. Arranging all of this resulted in me calling agents during every single break I had at school, using day time minutes and me having a MASSIVE phone bill (its a pity I hadn’t read Nick, Kate and Nathan’s blogs at that point). Even worse than this was that I didn’t even have an agent. I was trying to do all of this by myself.
Rule #2
Get an agent! Before you look for a house, look for an agent. Know what you are looking for in an agent and get recommendations from friends or family about it.
Not having an agent is scary for a few reasons:
- You won’t understand half the stuff the selling agents are trying to tell you.
- Every agent you meet will become aggressively attracted to you (in a real estate agent kinda way) and will try and convince you to make them your agent and they will call and call and call.
- This isn’t event the really hard part, it only gets harder and you will need that agent to work for you later.
So there I was in this madness of agents soliciting themselves and me just trying to find a place to buy and I finally met an agent I felt good about. The agent I found was straightforward, he didn't rush me and he was confident when dealing with other agents. Now that I had an agent I could start my real estate search effectively and efficiently. But little did I know that VIPBDS would rear it ugly head again soon...
To be continued...
My buddy, Matt, doesn’t know whether he should buy or rent the next place he lives. Right now, he rents a place with two other guys and he kind of feels like his money is being lost.
I totally know what that’s like.
I’ve been living in a rental apartment with two people(two great people, if and when they’re reading this) for a while now. When I think back on all the money I’ve put into this place, I wonder whether it would have been worth it to have just bought a place.
Prior to moving into this building, I never really thought of that option, but as I grow older, I wonder whether it would have been a good option.
Look at me jumping to conclusions; I’m assuming I can get a mortgage. Truth is, I don’t know anything about mortgages.
What I do know is how much money I’ve spent on rent. So, I’m going to break it down for the world to see:
- I pay about $600/month.
- 600 x 20 months = $12,000.
- If I include my roommates’ share of the rent, the total comes to $36,000.
We’ve spent $36,000 and when the move out date arrives here at the end of April, we’ve basically got nothing to show for it.
I’ve been thinking that it may have been a good decision for us to go in on a mortgage together—or “co-invest” as I’ve been told it’s called.
But I’m also hearing that renting can be a better option than buying.
When it comes down to it, you have to look at your options and what’s best for you. RBC has outlined some of the Pros and Cons on their site when it comes to comparing renting vs. buying. Here are two points that make me appreciate renting a little more:
- Renting allows you the freedom to move practically almost anytime you want; owning a home can make a move more difficult
- Renting usually puts the onus on the landlord to make repairs, owning a home can be costly if something goes wrong
Now I don’t know what to think.
I’ve also heard word that it may be best to hold off on buying a home in the current market. According to a recent poll conducted by RBC, only 7% of respondents are considering buying a home this year, compared to 9% last year. This is the lowest it’s been since this poll began being conducted over 15 years ago.
But I needn’t worry—and neither should you (I can tell you were about to lose sleep over all this). I’m going to have the opportunity to speak with a Mortgage Specialist in the coming days and I’m going to ask her ‘all that is mortgage’. Next week, I’ll let you in on what she had to say. If you have any questions you’d like me to ask her, post it and I’ll try to get the answer for you.
Sorry, Matt. I can’t help you figure out whether renting or buying is for you yet. But, in the meantime you can check out RBC’s Mortgage Centre and look around for yourself.
As for me, I’m going to research better ways I could have spent that $12,000.
So, a short quick explanation of why we're here!! A little late, but I've had some formatting issues with this video. Enjoy!
Note: The email address in the "Questions, Comments, Concerns" part of the video is p2p ( a t ) rbc.com! It's slightly illegible. Sorry 'bout that.
