Pillars of Buying

Four Pillars of Home Buying

maddy248563 Buying

In this write-up, we will review what are the four most important factors to consider when buying a home for ownership or as an investment.

Location – The location of a home plays a very important role in the future growth and Return on Investment of a property. How is the average family income of the neighborhood, what is the ownership/rental composition of houses in the neighborhood, how are the commute and transit needs meeting for going to downtown core from the neighborhood, how are the schools around the area, what is the composition of property types in the neighborhood, what are the recreational amenities available in the town etc. These all factors take precedence when in future you want to dispense the property and hence help us in making a good investment. The old adage of location..location..location holds well to this date.

Age – Age is another important factor to consider when you buy a home, the younger the home is the better it is for growth. As in the initial 15-20 years, any community goes through a growth phase, generally, the price rise is steeper in the initial 20 years, after which the prices increase, however, at a more moderate phase. Buying a young home also ensures that you are not looking at any major renovation expenses during the course of your ownership and can just enjoy the home with only cosmetic upgrades as you desire.  Why age is so important can be judged from the fact that in a given location one can buy a 40-50-year-old detached (higher property type) in the same price point as a newer 0-5-year-old townhome.

The correlation of age of a property to the price and the growth we can expect is due to the four distinct phases neighborhood goes through; Growth, Stability, Decline followed by Rebuild or Revitalization, each phase lasting ~20 years. Based on your specific needs, investment horizon and exit criteria you should determine the right age of property when you make the buying decision.

Phases of a Neighborhood

Property Type – There are a lot of property types in the Greater Toronto Area market when we decide for home ownership. Here is a quick look at the major property types in the increasing order of their appeal and growth based on their features and historical statistics.

Residential Property Types - IllustrationThe better the property type, the better would be the growth which you can expect as time passes by, the condo properties carry a maintenance fee per month which filters the buyers when you decide to dispense the property for this very reason, and growth is relatively lower than freehold counterparts. The low rise condos because of their conservative maintenance fee, fare bit better for the growth in the longer term, selecting a property type also depends on the living style of the family. If one wants to live in the city core, one would need to settle for high rise condo due to premium on land availability. Detached Properties are considered better for livability as the driveway is private by design and the walls are not shared, followed by Semi (one wall shared) and town (two walls shared) options in freehold category.

Within Detached properties, there are multiple sub-types – 2-storey, bungalow style, back-split, side-split etc; each having their plus and minus and leave that for a separate write-up.

Layout – When you review a property for a purchase, as a buyer you should look at the functionality of spaces in the home, essentially the layout should be livable where your family can enjoy all of the spaces. The cosmetic aspects of a home (painting, flooring, kitchen cabinets) can be upgraded very economically, however, the dimensions of the areas – living, family, bedrooms cannot be changed so easily. This is the reason why layout should be given a good consideration when you decide on a home. Also, when you decide to sell the buyer prospect who will come to review the home will have more probability to give you the fair value if the layout is appealing.

Once you have your budget qualified for your home purchase from the financial institution and you know your affordability. Next comes the job to evaluate between these four parameters and determine your top priorities to zero down on the location, property type, age and something with a functional layout. A very educated discussion on where you and family would like to live in the longer term, what are your family needs for home size, commute, amenities etc. And then the interplay of these four parameters and the right balance of these will give you a very sound purchase decision for your family.

Also, if your budget is strict you might be looking for your first investment into a condominium property rather than a freehold. Here in our article you can find all of the factors and key differences between these two types of ownership -> Condo Versus Freehold Ownership – Explained.

Hope you found it helpful, for many more such informative content refer here my other blogs.

Best..Mudit