Toronto has long been one of Canada’s top cities to live in, with a population that now exceeds 2.7 million residents. In addition, thousands of people from all walks of life move to the area every year.
- Families love it here because of its safety and the many recreational activities the city offers.
- Professionals flock to Toronto because of the plentiful career opportunities and exciting nightlife.
- Retirees are attracted by the many amenities and services.
- Newcomers to Canada often land in Toronto because of its diversity and reputation as a friendly, welcoming city.
No matter who you are, Toronto offers a high quality of living and some of the best amenities you can find anywhere. Unfortunately, all of this convenience comes with a price. Housing costs are some of the highest in Canada. Although prices have dropped in the last few months, they are still enough to prevent many people from realizing their dream of owning a home.
For many of us, the traditional approach of saving up for a down payment and securing a mortgage is no longer feasible.
What other options can you explore to buy a home in this incredible city?
A Change In Your Thinking Can Pay Off
Instead of thinking of it as a very expensive purchase, think of your home as an investment. For example, did you know that you can qualify for more financing if the property has a secondary suite? The bank will take your potential income into account, and you might end up being able to purchase a home much faster than going the traditional route.
Speaking of traditions, those who buy a house with a basement apartment usually live upstairs and rent the lower unit. But if your lifestyle allows it, why don’t you take the smaller apartment and rent out the rest of the house? The upstairs suite will command a much higher price than the basement apartment, making your monthly mortgage payments much more manageable.
Are you a student planning to live in residence? You could be looking at $14,000 to $17,000 a year, not including your tuition. After four years, this amounts to $56,000 to nearly $70,000.
Another option is renting a room in a house, which could cost anywhere between $500 and $1200 a month. At the very least, you’d pay $20,000 over the course of four years for accommodations alone. That’s not even taking into account your tuition costs.
Do you want to know more about investing in real estate? These other resources can help:
- 5 Things To Know About Real Estate Investing In Toronto
- The Ultimate Assignment Sales Guide
- Should You Turn Your House Into An Income Property?
Take One Room, Rent The Rest
Now imagine you bought the house, took one room, and rented out the rest. The average cost to rent a four-bedroom townhouse is about $2587 a month. Find a family to live with, and your monthly income could even surpass your mortgage payment, meaning you’re actually getting paid to live there.
Plus, your equity will grow as housing prices rebound. (Housing values have dropped at the moment but consistently go up over time.)
At the end of four years, you’ll own a valuable asset that you can either decide to keep or sell for a profit. That beats graduating from university with tens of thousands of dollars in debt!
Buying an investment property when you’re young and in school may require assistance with a down payment or a relative to cosign your loan. However, it will provide an excellent headstart in life if you can make it work.
Invest As A Team
Unless you’re fortunate enough to earn an income of $220,000 or more each year, it is almost impossible to afford a home by yourself. Why so much? In June, the average cost of a condo “fell” to $771,267.
At that price, a 20% down payment works out to $154,253. How long will it take you to save that much? Some people have parents or relatives who can help them. However, for most people starting out, it’s nearly impossible.
Now here’s something you might not realize: Buying a house that’s twice the size doesn’t necessarily cost twice as much. For $771,267, you get a tiny starter condo.
The average cost for a townhouse right now is $1,070,050. For that, you get more bedrooms and far more living space. Some townhouses may even have the possibility of a secondary suite.
The 20% down payment works out to $205,410. In many cases, that’s too much for one person.
But What If You’re Not Alone?
Get together and buy as a group of four, and the down payment comes down to $51,352 each, which is much more attainable. Anyone in the group who is a first-time buyer can pull $35,000 from an RRSP without paying a tax penalty. Buying as a team drastically reduces your monthly payments, and the cost of running the household will get split four ways.
Everyone gets the benefit of homeownership and the chance to build equity. Of course, there are some challenges to buying as a group. It can be difficult for one person to decide on a home, but now you have more people who have to agree.
You’ll also want to work carefully with a lawyer to make sure everyone knows what they are responsible for and that your legal interests are protected in case of a dispute.
If any co-owners want out later, you’ll have the option of selling, and everyone cashes in on their share or buying them out and keeping the home.
Is co-ownership right for you? Find out more in our article here.
Buy From A Relative
If you have a family member who is thinking of moving or downsizing, you may be able to come to an agreement. You can rent from them with a portion going towards equity in the property. In the case of an elderly family member, they may be able to age in place with your help. In exchange, they might offer you a break on the price or allow you to co-own the house, which helps you secure your financial future.
While not every scenario will work for everyone, these solutions can help you escape the rent cycle and get your start as a Toronto homeowner.
Do you want to talk about your options for investing or buying a new house in Toronto? We have plenty of ideas and would be happy to help you get started. Reach out to us here for a no-obligation chat.