roller-coaster

Does Affordability of Homes in Vancouver Matter?

This article was published today in Vancouver’s go-to business publication Business in Vancouver (BIV).  These kind of articles are always written in such a way as to make it seem that prices will never fall again and that those who cannot buy now are in a position of potential loss or at least the fear of getting left in the Jones’ real estate dust.

In times of bubbles – and some will even try to say this is not a bubble but some kind of ‘steady increase with a solid basis’ – this effect is amplified.  We see people do exactly the same things when a certain stock is taking a crazy run up the charts.  I have been the victim of this one at least twice and I can still feel the regret of rushing in with the mobs today.

What? Are you saying as a real estate agent that someone might *regret* buying a home today in Vancouver? YES! I am saying that!  That is, unless, you have the ability to withstand the following potential challenges:

  • a potential and eventually inevitable increase in interest rates
  • a very, very, long mortgage payment which stretches past the point of death (‘mort’ as the French say)
  • possible continuation of a poor economy
  • possible loss of employment resulting from the aforementioned poor economy (or otherwise)
  • another potential ‘life event’ which could cripple a mortage payment (hint: think marriage)

Although I have many wise friends around me who discourage people from owning real estate at all, I’m not going to go that far.  I think there is something neat about being able to secure a piece of land and not move if your landlord gives you notice.  One of the same wise men above was forced to move just months after moving in which is absolutely disruptive.  And sometimes, the increase in asset value works in your favour (such as my mom who currently has a 70’s home in Richmond valued at a quite humourous 1.0 million) and you can sell at the top of a hot market.  Also, on the topic of real estate as an investment, I figure that if you have no other plan to invest your money, that it’s possible that you might do better in real estate than burying it under your mattress.  Other’s have even argued me on that point, though.

But for those of you out there like me who can’t afford to take a hit that will cripple their family’s financial future, I recommend a more conservative approach.  I’m not advising not to buy real estate, but I am advising to think things through.

Do the math.

What would happen to your payment if interest rates go up just 1%?  What about 2 or 4%?  And what would happen if the value of your home plummets 30% and you suddenly needed to sell and move to Winnipeg because that’s what the cool kids are doing?  Then what?  What if the rental market craps out because there is a glut of un-tenanted condos on the cheap?  Just take some time with someone around you (ie. an unbiased financial planner if you can find one) and run these scenarios.  Make sure that you are not putting your family at risk for a badge of home ownership because take it from me that the stresses of making a mortgage payment when the family income stream is disturbed is not fun. Renting, even if temporarily, offers a lot of advantages, such as these:

  • ability to write an offer to purchase without ‘subject to sale of own home’ clause which makes your offer very strong, should you choose to buy real estate in the somewhat near future
  • ability to change neighbourhoods much more easily if you don’t like where you are – you can give a neighbourhood a ‘test run’ without paying property transfer taxes and realtor fees
  • no maintenance and repair fees
  • ability to invest your money elsewhere (do not do this without a strong plan, though!)
  • etc

Don’t forget.  Every market is a roller coaster and unless you have a crystal ball, expect some downs with the ups.  This video will help put it all into perspective.

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senior-couple

Seniors: Is Downsizing Your Only Option?

I used to think that a senior should enjoy their big family home and then sell it and move into a strata condo unit and pocket the cash from the sale of the home.  I never considered that this might not make sense and therefore started this plan with my own parents.  One day, a friend of mine questioned me on the financial intelligence of this move.  From that point on I started totally rethinking the topic and have come to the conclusion that there is more than one path a senior could take when dealing with their home.  The three major choices are to stay where you are and retrofit your current home, sell your home and rent a home, or downsize/right-size your home.  Let’s take a look at each option.

Staying and Retrofitting

I am not a contractor, nor yet a specialist (although I have plans to be) in the arena of home technology available to improve life at home for seniors, but rest assured that everything you could imagine probably already exists.  How much would it cost to totally renovate your current home to make it ‘golden oldie friendly’?  Once you have that number, you can then compare to the costs of selling your current home and buying another home.  Agents like me are pricey and we don’t give senior’s discounts like your transit company or local family restaurant! Once you’ve worked out all those costs you may be surprised to see that you haven’t gained a lot by moving.  Don’t forget that if you are, say, 75 years old now or older, the maximum time you will be able to stay in your next place without some help nearby is about 10 years.  The average life expectancy in Canada is, after all, 81.  Does it make sense to blow your money on a real estate agent and property transfer tax twice in 10 years?  If you don’t know the answer, perhaps ask your financial adviser…  There are many in-home nursing companies that offer part or full time help as the needs require and who charge much less than what it would cost to move into a full time senior’s home.  You could retrofit your house and put a good amount into care and continue to enjoy your nostalgic pad where your offspring once frolicked.

Sell and Rent

Although you will have the disruption of moving and adjusting, selling and renting could make a lot of sense for you.  You get to take that big wad of cash from the over-valued 70’s home you live in and drop it into a conservative investment and live quite well off of it. Maybe you want to start splurging on your grand kids?  This could be your way.  Maybe you want to start travelling the world before your doctor bans you?  Selling your home might be your ticket out.  Renting also gives you the ability to keep a home much like the one you just sold.  Always take some time to crunch these numbers because they are always revealing and somewhat surprising.

Downsizing/Right-sizing

Maybe home ownership to you is a badge you like to wear.  I get it.  I’m a home owner, too, and it feels kind of neat to know that your landlord can’t force you to move.  There is certainly one level more security by owning than by renting.  However, it’s crucial again that you crunch the numbers.  You will pay real estate and closing fees and the dreaded property transfer tax for the honour of paying even more per square foot for your new shoebox.  Plus, it will probably be quite hard for the kids and their families to drop by for the weekend and sleep over – but maybe that’s part of your strategy.  You may lose your garden and workshop.  How important are those to you? There are now public shared workshops that are starting to pop up around town that you could track down and join, though, if you crave it.  On the plus side, if you downsize to a condo, they take care of your garden for you.  Maybe you are done with that weed-ridden menace and it’s time to watch Murder She Wrote uninterrupted for once.  Also, thinking about your roof, snow removal, and the like are no longer all your burden but that of the property management company and council.

I hope that this has been a thought provoking post and that you will take some serious time to think about what’s best for you – not what your kids or your real estate agent says is best for you.   If you do decide to sell, however, it’s always a bonus if you can sell on the top of a housing bubble like the one we are in now in Vancouver.

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hand-writing

What is an NDA and Should I Sign It?

Is a real estate agent or business owner asking you to sign an NDA? What is it? Should you sign it or not? Here’s a quick overview.

There are lots of articles out there defining and expounding on Non Disclosure Agreements (NDAs). A great example is this article over at rocketlawyer.com (awesome name, incidentally as I imagine a lawyer in a superhero outfit).

To summarize it all in one line, an NDA is a contractual secret.

Picture this dialogue to bring it home:

Buyer: I’m thinking about buying your business.  How much money flows through this till?

Seller: Don’t tell anyone, please, but we do $2000.00 per day CASH!  That’s a secret. Don’t share, please.

Buyer: That’s not so bad, but I was hoping for $2200.00 per day.  Have a nice day.

Three day later, the buyer opens up the same business right across the road and steals all the ideas, and cuts the daily sales of the Seller to $1200/day.  Not very cool and happens all the time.

An NDA would have either protected the seller for a period of time, or punished the buyer severely in court for his unethical behaviour –  or both.

There are sample NDAs out there, but you should consult a lawyer to make sure that it’s bulletproof.

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north-delta

North Delta Was Greater Vancouver’s Best Kept Real Estate Secret

Until I wrote this post, North Delta was the highest value and best priced real estate market in Greater Vancouver. Why do I say that? Simple. Value.

If you sum it all up, real estate is a constant pull between the physical home (ie. size, kind, age, etc) and location (where the land is the real estate is stuck on). The nicer, the newer, and the closer the home is to where people seem to want to live, the higher the price.

North Delta, like it’s geographically sister city New Westminster, brings a central location (much better than other more expensive areas of South Surrey for example) to the whole lower mainland, a lot of really nice neighbourhoods, and a price that is, for the most part, not going to bury you and your future generations in debt.

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As a local North Deltoid (don’t try to tell me that’s incorrect terminology), I can say for sure that I have had a great experience and do not regret my decision and many of our friends and family are now making the move.

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