Right Time to Buy a Condo?

[DarkMasterMX]

My brother and I have been going back and forth considering buying a condo to share between the two of us and selling in the future when he decides to get married/move out with the lady etc...

I was recently referred to someone selling their condo in the same building I'm renting from as a private sale. Their price is fairly solid compared to other units we've seen pop up for sale in the building. Apparently they are in a rush to sell and would be willing to negotiate and go even lower on the price so its making it increasingly tempting.

Buying isn't something that has to be done but both my brother and I feel it is a positive step towards moving ahead in life instead of dishing out 20k a year to rent that really gets us no where.

That said, there seems to be a lot of back and forth on where the market is going etc... and I don't want to jump into something and buy a property just to have the market shift in the near future and cause problems.

Can anyone off some insight or ideas? It would be a first time buying for us so help is always appreciated!

[BinaryJay]

I think the market will remain static or grow slowly, I don't see it dipping with any significance any time soon... but in Markham? I have no idea...

[Jay31]

I'm not familiar with your local housing market, but do the math before declaring that your rent money is "going nowhere": http://www.nytimes.com/interactive/business/buy-rent-calculator.html
(Fyi: Be sure to adjust all of the advanced settings - in particular, set the marginal tax rate to '0' as you're in Canada)

Many people declare their rent money as 'going nowhere' or being 'thrown away' without doing the math on how much money is 'thrown away' when they buy a condo. Frequently, mortgage interest + condo fees + property tax alone will be more than the cost of rent for several years...and all of that money will be "going nowhere". On top of that, there are many other owning expenses (money going nowhere) that you will not spend if you rent. As you know you'll be selling within a few years, you'll also have to consider real estate fees and other transaction costs, which can often amount to $10-20k.

The bottom line will likely be that if you're not expecting substantial real estate appreciation in your area in the next few years, renting will likely come out cheaper. Do the math though...

[Busybuyer888]

Also, the rent normally covers taxes and maintenance fees. Those fees can add up to 1/2 the monthly rent.

Taxes and maintenance fees need to be deducted from the rent to evaluate whether you actually rent vs. buy. Normally, this equation don't lend itself well to buying ... unless one factors in a significant appreciation factor. Also, factor in a 1% increase in mortgage rates (a reasonable assumption).

There is also the 2% land transfer tax when buying the condo. Selling as another poster has pointed out has a RE sales commission fee ... 5%.

[starrysim]

To both replies above - well said!

To OP - Take their advice and do make sure to consider how much money you would still be throwing away when you're a homeowner. Also look up a mortgage calculator that shows you a graph of how much of your payments will be going towards interest and principal, especially in the first 5-10 years. It's eye-opening.

IMO, if you're not in it long term, I wouldn't recommend buying a condo. But do save aggressively in the meantime, while you're renting.

[oldpro]

I'm not familiar with your local housing market, but do the math before declaring that your rent money is "going nowhere": http://www.nytimes.com/interactive/business/buy-rent-calculator.html
(Fyi: Be sure to adjust all of the advanced settings - in particular, set the marginal tax rate to '0' as you're in Canada)

Many people declare their rent money as 'going nowhere' or being 'thrown away' without doing the math on how much money is 'thrown away' when they buy a condo. Frequently, mortgage interest + condo fees + property tax alone will be more than the cost of rent for several years...and all of that money will be "going nowhere". On top of that, there are many other owning expenses (money going nowhere) that you will not spend if you rent. As you know you'll be selling within a few years, you'll also have to consider real estate fees and other transaction costs, which can often amount to $10-20k.

The bottom line will likely be that if you're not expecting substantial real estate appreciation in your area in the next few years, renting will likely come out cheaper. Do the math though...


Also, the rent normally covers taxes and maintenance fees. Those fees can add up to 1/2 the monthly rent.

Taxes and maintenance fees need to be deducted from the rent to evaluate whether you actually rent vs. buy. Normally, this equation don't lend itself well to buying ... unless one factors in a significant appreciation factor. Also, factor in a 1% increase in mortgage rates (a reasonable assumption).

There is also the 2% land transfer tax when buying the condo. Selling as another poster has pointed out has a RE sales commission fee ... 5%.


To both replies above - well said!

To OP - Take their advice and do make sure to consider how much money you would still be throwing away when you're a homeowner. Also look up a mortgage calculator that shows you a graph of how much of your payments will be going towards interest and principal, especially in the first 5-10 years. It's eye-opening.

IMO, if you're not in it long term, I wouldn't recommend buying a condo. But do save aggressively in the meantime, while you're renting.
Thank you all for such detailed and excellent analysis. My partner and I are not looking to buy anything, actually we are selling our house and will be renting for a few years while we still can manage on our own (2 very old seniors here :)) and then, on to an old age home...(someone said that old age is a wonderful time of your life - bullsh@#, it sucks big time :facepalm:)

Cheers and thanks again.

[will888]

I think it is a very bad time to buy a condo these days. The pricing is ridiculous, $700+ per square foot for a shoe box size property. As a property owner (not a condo btw), I would love to see it hit $1000 per square foot. The reality is this kind of escalation is not sustainable. There may be no correction but at least there has to be an end to the unsustainable price rise.

Old Pro, you sure give me some bad vibes about growing old. I wish I could stop it, but no such luck here. I don't look forward to the day that I have to live in a nursing home.

[oldpro]

...Old Pro, you sure give me some bad vibes about growing old. I wish I could stop it, but no such luck here. I don't look forward to the day that I have to live in a nursing home.
Hey will888 - don't mind this old fart - I just had a bad day... Today, after a strong morning coffee, all is well again :)

Re. condo/house prices: I am also amazed that prices have not corrected (yet). Much better minds than me are also confused about this. Maybe the low interest rates have something to do with it, allowing so many people to buy, but also, so many people are mortgaged to their ears. But, I would not be surprised if we see a correction in prices one day soon - and if interest rates go really up, even the crash is possible. Just my 2 cents.

[will888]

Hey will888 - don't mind this old fart - I just had a bad day... Today, after a strong morning coffee, all is well again :)

Re. condo/house prices: I am also amazed that prices have not corrected (yet). Much better minds than me are also confused about this. Maybe the low interest rates have something to do with it, allowing so many people to buy, but also, so many people are mortgaged to their ears. But, I would not be surprised if we see a correction in prices one day soon - and if interest rates go really up, even the crash is possible. Just my 2 cents.

I have been following the market quite closely this year. I am already seeing change. I see less bidding wars and sold prices reasonably below 100% of asking. No sure if it is seasonal or real change though. Interest rates will not go up for a generation until the sovereign debt is resolved. Once the euro disappears and the US has their day in the spot light...

[gizmo8]

Come on people condos in prime areas are on the market for less than a week...a friend of my sold her Portland St unit in 4 days with multiple offers....the good units are still selling the ones that is not in the best location or the best fit and finish is going to be on the market for weeks or months but are still selling.......yes some units been on the market for months but the sellers are unrealistic of the value of their units and tend to not budge on pricing.A small reduction in price will make and break on a sale these days....

[Astin]

The right time to buy a condo is when you need it.

The wrong time to buy anything is when you're buying it with someone else to share. Well, I suppose a sundae or bag of chips or pizza is okay.

Partnerships, even with family, can be poison to a relationship. Who's to say your brother (or you) doesn't get a job offer in another city, or decides to move in with a partner in six months? That leaves the other half on the hook or inconvenienced.

And if your goal is to buy as a short-term investment, then good luck. The market WILL go down, it's just a question of when, be it this year, or a decade from now. Buy a place to live, not a savings account.

[DarkMasterMX]

Hmmm thanks for the responses guys. Some of them actually were eye openers on the concept especially as a short term investment. I'll take a look over those links but tbh, based on what I read here its not something I should get into now and I should just start saving up for my own something down the road from now.

[cheapgeek]

Hmmm thanks for the responses guys. Some of them actually were eye openers on the concept especially as a short term investment. I'll take a look over those links but tbh, based on what I read here its not something I should get into now and I should just start saving up for my own something down the road from now.
By then they will be 3 X the price condos are going up just read the news. Listen to what Brad Lamb is saying he knows his stuff like no body else in the biz.
http://www.cbc.ca/news/business/story/2012/07/02/f-toronto-condo-boom.html

[hobgoblins]

It was the right time for me, but I have no idea what your local housing market looks like. I would be paying more for rent in my area and am going to make a sizable profit when I sell. You have to figure out what works best for you, given your options.

[Rocky03]

The right time to buy a condo is when you need it.

The wrong time to buy anything is when you're buying it with someone else to share. Well, I suppose a sundae or bag of chips or pizza is okay.

Partnerships, even with family, can be poison to a relationship. Who's to say your brother (or you) doesn't get a job offer in another city, or decides to move in with a partner in six months? That leaves the other half on the hook or inconvenienced.

And if your goal is to buy as a short-term investment, then good luck. The market WILL go down, it's just a question of when, be it this year, or a decade from now. Buy a place to live, not a savings account.

+1. This should be a sticky.