Lessons Learned From 3 Years as a Home Owner

balcony view toronto, condo, real estate, home owner

Three years ago this past September I bought my first home, and in the process made the biggest financial decision of my life. I can honestly attest that my home purchased has been the best decision of my life, and something that I’ve embraced whole hardheartedly. As a home owner over the past four years I’ve discovered a lot about my self and finances.

To be quite honest, the whole purchasing of my first home was sort of a fluke. My finances were a mess, I didn’t have any money saved, credit-card was maxed out, and I was living paycheck to paycheck. I knew I need to make changes, but I was definitely in no hurry. While in a financial mess, a close friend who worked as a financial advisor suggested I start saving for retirement by opening up a RRSP, through taking out a $5k loan.

I figured I needed to grow up at some point, so I took her on the offer and followed her suggestion – take the large tax break from the government at tax time, and apply it to your repayment. Thankfully I listened, and paid off the loan within 12 months. Later in the same year (2008), recession hit, and the government introduced the Home Buyers Plan – using your retirement  savings to apply as a down-payment towards the purchase of your first home.

Six months later, I bought my first home with a 5% down-payment consisting of HBP and some savings I had. See, I told you my first home purchase was a little luck and a bit flukey. So, I purchased my first condo in a 40 year old building which consisted of 1,000 sq feet, two bedrooms, a bathroom, and a balcony big enough to park the beemer. The condo was a dump, but was selling $20k below than other condos in the same building – so I jumped on it fully knowing that I’ll be getting my hands dirty.

I always said that necessity is the mother of invention, and I’ve learned a lot about home ownership and my finances over the past 36 months.

Here are a few lessons I learned:

1. Buying Less is More

So, I did the whole pre-approval thing, and knew roughly what my bank would approve me for. However, after all was said and done, I took less than 60% of my bank was offering me to buy my first home. I was thinking about the future, and not knowing how I’d handle home ownership, I wanted to give me self a cushion so I can save some money, and still have a life.
When faced with the choice between a one-bedroom condo and a two-bedroom option. I ended up buying the two-bedroom option because, not only is it easier to sell a two-bedroom condo vs. a one-bedroom, but I also wanted to have an office separate from my bedroom.
I also bought in an older building and in the process skipping a lot of extra costs such as concierge, library, fitness center and all the other bullshit that comes with the building yet nobody uses. What I signed up for was a monthly condo fee that included a lot – cable, parking spot, outdoor heated pool, water, hydro, heating and building maintenance.
You don’t need to have the latest and greatest, but by being frugal and shopping smart you can get a lot in return. I have friends who went for the latest and greatest, and are paying more in monthly condo fees in building’s less than 5 years ago. I can only imagine how much the monthly fee will be in 10 years.
2. Home Ownership is More than a Mortgage
Even before I purchased three years ago, I knew that owning a home is more than a mortgage. But somehow, even when you know you’ll have to pay property taxes and home insurance, it’s still a shock when it comes to writing those checks.

For instance, I pay about $450 per month to heat, cool and power my 1,00-square-foot starter condo in Toronto. That’s on top of my mortgage, but we all need utilities to survive. I spent $1,300 a year on property taxes, and my home insurance is just under $45 per month. This is not counting the maintenance costs, and any extra unexpected repairs.

Despite all the extras, I still wouldn’t change a thing, because I love everything about home ownership.

3. DIY or Pay Out of Your Nose

Before I bought the condo, I considered my self as someone I would have classify as “handy.” I’ve painted, assembled, and learned a lot over the years at my parents home.

It’s been a busy 36months, and every few months there’s some reno project going on in my condo. I’ve come to a point that there’s virtually nothing left to paint, refinish, strip, fix or upgrade. In 3 years I’ve installed new hardwood floors, new kitchen, backslash, fully painted the whole condo, new bathroom, changed every single interior door, new light fixtures, new exterior balcony door, and tons of other minor upgrades.

4. Plan Ahead

There’s always something to be done on a house. The trick is to separate needs and wants, to figure out what is the best use for your money and your situation. It took me 36 months to get my condo up to the standard that I wanted. Never in my dreams did I imagine that it would take this long, but renovations are anything but cheap.

I planned ahead by picking up creating a renovation budget and trimming the budget in certain places to save the money for the project in advance — with a cushion, of course, to cover the unexpected. Because no matter how much you budget, you’ll always go over budget. Something that took me a long while to understand.

5. Always Do Your Own Comparison 

Having a Realtor is not a full blessing in disguise. You gotta remember, your Realtor is no different than the sales rep at the car dealership – they know the product, industry and all the jazz, but at the end of the day they’re there to earn a buck. My Realtor recommended a lawyer (chose my own in the end), a handy man (did majority of my renovations with friends) and financing options for your mortgage (found my own financing through a broker) – at the end of the day, anytime a your realtor refers you to someone within their circle, they may be doing you a favor by sending you to someone they know, but you don’t know them, and you’re also not the one earning a referral fee either.

Readers,  what were the biggest lessons you learned during your time as home owner?

Best,
Eddie

Photo Credit (quasimeme)

Comments

  1. I learned never to buy when the housing market is doing well. :-)

    We have lost about $25k in equity because we bought at the peak.
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  2. Just bought my first home recently and the renos have been difficult and taught me a LOT about handiness (something I am not at all, but maybe becoming more handy with all of these projects). We didn’t get the most expensive house we could afford either, just a nice one that was all we needed.
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  3. For me, one of the biggest lessons I’ve learned since becoming a homeowner is to wear gloves when you’re cleaning out the gutters. ;)
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  4. I learned that buying a home is an emotional decision, although I tried to make it a more logical one. It is real important to take as much emotion out of a financial decision as possible.
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  5. The biggest lessons I’ve learned are: (1) it takes a lot of work (and money) to properly upkeep a house, and (2) I’ve learned more about what NOT to do and to always keep the resale value in mind. With a tough economy and a slow housing market, it’s extremely important that you buy a home you can stay in for 5-10 years. If you need to sell your home sooner, then you’ve better bought a good one or else you’re going to have a really difficult time getting rid of it.
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  6. I think your first point about not using the full amount the bank approves you for is the most important. You don’t want to be house poor. Also, you don’t have to do everything at once. We had two rooms that had no flooring or paint for three years after we moved in. It is also OK to have rooms without furniture. Get used to the payments and expenses before you go out and buy all new stuff. Overall, I agreee. I love owning a home, and think it is well worth the work you have to put into it.
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  7. just became a homeowner in July. It’s been great thus far…I’m fortunate that I am not a few years older which would’ve “caused” me to purchase a place at the peak of prices.

    I’ve never heard of anyone taking out a loan to fund a retirement account. But in your case, it sounds like you used the loan as the down payment in which case you essentially financed 100%.

    It sounds like it worked out well for you. I’m curious if the same strategy would work in America or if it’s just a Canadian thing?
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    • I used to work for a financial institution and a lot of people borrow during RRSP season to maxout their RRSP contributions. You get a bigger refund that can help you payoff RRSP loan sooner. In addition there are other benefits such as lower income tax bracket and other benefits such as higher GST refund, child beneifts(depending on eligibility).

  8. I learned that I should have bought a two bedroom or a one bedroom plus den. I’ve learned the hard way that working from home when you only have a one bedroom condo is hard… and cluttered.

    By far the biggest mistake I made was using one of the big hardware stores to renovate my kitchen after I bought it. I could have saved about $5,000 if I had found a contractor instead.
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  9. The things you learn as a homeowner, wow. This was my first home in Canada and I’ve learned alot. What I did learn when I bought my first house around 19-20 was that DIY if I could do would cost me MUCH less. I’m pretty confident with my DIY skills and have done up 2 of my own houses BUT I have always paid to bring in the professionals when needed. There’s nothing worse then ripping out someone’s crap job because they “thought” they could do it. Sometimes I just shake my head when we go to open houses and see the workmanship of some these DIY projects. So, you pay to have to rip it all out which makes no sense. One of my biggest pet peeves are home owners who buy these homes and let them rot to the ground. What’s the point? I also learned that less is more. Although the banks say here have x amount.. don’t do it. If you can pay your bills on one income as a couple that’s the way to go. That’s what we did, on the lowest income as well and now we have the cash to pay this house off in full. Thanks for sharing, great read mate. Mr.CBB
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  10. ” DIY or Pay Out of Your Nose”

    LOL! So true!

    I’ve learned to do things since becoming a homeowner that I never even thought about when I was a renter. (You make a lot of great points, but that one really made me laugh..)
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