How to Make Your Home Purchase More Affordable

Buying a home has long been one of the most memorable moments in anyone’s life. The financial benefits are considerable. Owning real estate allows you to build equity and grow your net worth as housing values rise over time. Plus, nothing beats the pride and comfort of having a place to call your own. However, buying a house is now starting to feel like a luxury only attainable for a very lucky few. 

High housing prices (especially in the GTA), rising interest rates, and a more stringent stress test can seem insurmountable, even for families with dual incomes.

Many people feel like they’ll be stuck forever in the rental market. But even that seems like a catch-22 as rent prices are also becoming unaffordable. What solutions exist that can help you get into the real estate market sooner rather than later so you can begin building your equity? A few creative solutions might just be the answer you are looking for.

Look for Income Potential

Many houses can easily be converted into income properties, which makes your purchase more affordable in two ways.

• The obvious reason is that generating income will help cover your monthly mortgage. Depending on your location, renting out a portion of the home may cover most, if not all, of your costs.
• The second reason is that many lenders will consider your projected income when approving you for a loan, which means you could end up with a higher amount. Since qualifying for enough financing is often one of the most challenging aspects of your purchase, this is a massive advantage.

If this is an avenue you want to explore, it’s essential to know what could indicate income potential. A house that needs too many expensive renovations may negate any benefit you gain from bringing on a tenant. Here are a few things to look for: 

• A home with a separate entrance
• High ceilings and large windows in the basement
• Roughed in plumbing for a second kitchen and bathroom
• Sufficient insulation
• A highly desirable location

Location, location, location is everything in real estate! A house near a school and public transit can command higher monthly rent because of the convenience factor.

What else should you look for when buying your new home? Here are some ideas that will keep you on the straight and narrow:

• What Compromises To Make When Buying A Home
• What Can You Buy In Etobicoke For Under $1 Million?
• Don’t Make These Mistakes When Buying A Home In Etobicoke

Buying a Home With an Existing Secondary Suite

Buying a home with potential is an excellent solution if you have the skills or the connections to handle the necessary renovations. But you can save time and earn income right away if you find a turnkey home where a secondary suite already exists. Both units are move-in ready, and you can start lining up prospective tenants as soon as the transaction closes. 

The initial cost may be higher for a turnkey solution. However, by the time you factor in the price of labour and materials, it may be well worth it.

Here are some of the features a home needs for the secondary suite to be considered legal:

• At least 145 square feet for the combined kitchen, dining, and sleeping areas
• Windows in the living room and bedrooms
• Adequate heating and ventilation
• 30 minute fire separation between units
• Smoke detectors and carbon monoxide alarms in each unit
• Means of emergency escape for both units

A real estate agent with investment experience can help you determine whether a house meets all the legal requirements for secondary suites. You can also see a detailed list of Ontario’s guidelines right here.

Intrigued by the thought of owning an income property? Here are some more resources you may enjoy: 

• What To Look For In An Investment Neighbourhood
• How To Find Great School Options In Etobicoke
• Is Now A Good Time To Become A Real Estate Investor?

Unique Solutions for First-Time Buyers

First-time buyers are often at a disadvantage in the GTA real estate market. High prices are less of a concern for current homeowners because they can sell their existing house to fund their purchase. Unfortunately, most first-time buyers don’t have the equity behind them, and housing affordability remains a struggle. But a little creativity can help you get into the market more easily. 

The first step is to decide how much help you need to cover your monthly carrying costs.

• If a few hundred dollars will make a difference, renting a single room in the house may give you the boost you need.
• Living in the main unit and renting out the secondary suite can greatly reduce your financial burden. However, it won’t likely cover 100% of your mortgage on a house in the GTA.
• If feasible, why not consider staying in the smaller suite yourself? This allows you to earn more rental income, perhaps enough to cover your entire mortgage payment.
• If you’re young and single, you might even stay in one bedroom while renting out the whole house. This is an ideal solution for many university and college students. Instead of paying rent, you’ll earn money every month. Then you can sell the house after you graduate and cash in on the increased equity. What a great way to get a financial head start in life!

Buying a house with income potential can be a temporary solution until you can afford the costs on your own. If you ever decide you want the place to yourself, you can remove the secondary suite and renovate it to your specifications. However, many homeowners will continue to rent the unit and use the excess funds to invest or to enjoy. By breaking into the housing market now, more options will open up to you down the road!

Are you ready to take the first step to owning your own home? We are happy to guide you and answer any questions you have along the way. Contact us at contact@thompsonsells.com or call 416-450-5900 for a friendly consultation.