House Hunting Updates

February 14, 2010 Posted by Tyler Cruz

A couple months ago I posted how I was tired of condo living and was ready to buy a house. I was serious about it and have been scouring the MLS nearly everyday since then, looking at what’s out there and what I can get in my price range.

I met up with my independent mortgage broker, the same one who I worked with when I bought my condo 3 years ago, to ask a bunch of questions as well as go through the process to get preapproved for a mortgage again.

Since I incorporated back in February of 2008, I’ve only been paying myself what I need to live comfortably and not a penny more in order to take advantage of the low corporate tax rate. However, this can create an issue when you want to request a loan from the bank. While my 2007 personal income was very high, my 2008 and 2009 (2009 being based on my T4) years were extremely low.

Since the banks here only take the previous 2 years into account when factoring how much they are comfortable lending you, I was originally not approved for as much as I’d like in order to get a half-decent house. They used to take the previous 3 years, but changed once the whole housing and economic crisis hit recently.

Fortunately, my mortgage broker was somehow able to get them to take my 2007 year into consideration which bumped up my preapproval amount pretty significantly. After factoring in all of the costs of buying a home including closing costs and all that jazz, I am able to afford a house in the $380-$390k range. Since there is always bargaining room, I am looking at homes up to the $425k range.

Location, Location, Location

I’ve been continuing to watch scores of House Hunters, Property Virgins, and My First Place episodes from HGTV to get into the home-buying mood, but sometimes it can work the other way around. It is absolutely insane how cheap houses are in some parts of the US, such as Georgia, Las Vegas, and Texas.

Here’s a video of John Chow and me looking at some houses in Las Vegas about a year and a half ago. Sorry for the shaky camera-work, I was looking at the house and not focusing on the video ;)

Then again, I’m a lot more fortunate than if I were to buy a place in London or New York. But that’s the thing… I don’t live in a big city yet it’s still expensive here. I guess that’s the price you pay for living on an island.

Closing Costs

The closing costs will suck. There’s CMHC (Canadian Mortgage and Housing Corporation) which is basically a mortgage insurance (although I’m putting down a pretty decent down payment so it won’t be too much), realtor fees, and a property transfer tax which is 1% on the first $200k and 2% thereafter. So if I were to buy a house at $390k the property transfer tax would be $5,800.

Combined, it all adds up, especially when it’s coming out of my pocket and can’t be tacked onto the mortgage.

Mortgage Penalty

There’s also the mortgage penalty to worry about. Since I was locked in at a fixed rate on my condo mortgage, it’s actually more beneficial for me to get out of it and pay a flat penalty payment since mortgage rates are so low right now.

For the house, I will be getting a variable rate mortgage at prime-1 with the option of locking it down at any time (should rates start to increase). The cost for this will be around $5,000 though, which just adds more money onto the whole process.

Putting my Condo up for Sale

Now that I have been preapproved for a new mortgage and thought things out a bit more, I think I’m ready to put my condo up for sale on the market. I used to work for a real estate company here as their web developer and designer, and they actually specialize and focus on condos, so I’m naturally using them as my agents.

I’ve already been giving the comparables of the other units in my building so I know how much they were listed at, and more importantly, sold for. I now know exactly how much I should list my place at now. I’ll make at least $20k profit from when I bought it 3 years ago, which isn’t too bad. When you look at things that way, it kind of pays for the interest of the mortgage I’ve been paying over the past few years, so it’s like getting a free loan.

Since there is another unit in my building for sale as well, it might bring on a bit of price competition. However, mine is on the second floor and theirs is in the first so hopefully buyers will understand the difference (security and views). The other unit is priced $2k below what I want to list mine at, so we’ll see how that does.

I have no idea how long it will take to sell my place, but I’m hoping not too long. We are currently holding the Winter Olympics in Vancouver on the mainland (I’m on Vancouver Island), so maybe that might help things.

Possible Candidates

Once I got my mortgage preapproval raised, it really increased the number of decent houses out there. Here are 4 houses that tickle my fancy – but there are actually a couple dozen which I’m still considering… I just didn’t have room for all of them here.

House #1:

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More Photos and Info

This is one of my favourites. My main concern is that the kitchen is just a bit small with not a lot of counter space and not a lot of height (for my blender for example). Yes, I nitpick ;)

House #2

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More Photos and Info

Again, there isn’t a whole lot of counter space on this one, and the backyard needs a bit to grow a lawn, but otherwise I like it.

House #3

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More Photos and Info

Nice ocean views but a bit of a weird layout, and a grassed backyard is unknown…

House #4

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More Photos and Info

Pretty nice house, just needs a bit of colour and accents, and some granite countertops in the kitchen. Oh, and I don’t know if it has a grassed back yard which is a must…

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Posted: February 14th, 2010 under Personal  

40 Responses to “House Hunting Updates”

  1. Looks like you got some great options. Water views would be awesome but you have to consider the layout.

  2. I like the look of number 4 best! One thing ‘maybe’ you need to think about… When I clicked the More Photos and Info links the actual address of the properties are shown… Just considering that you do end up buying one of these would you like people to be able to track you down to that address if you’re disclosing your income online considering you may make 6 figures and above per year. Maybe I’m being over suspicious but is it worth thinking about? Good luck with the hunt!
    Enda

    • Tyler Cruz says:

      My address is already listed in my WHOIS information… as well as at the bottom of all the e-mails sent out to my newsletter feed ;)

      • ;) i wasn’t sure if you posted it on your site or not but thought you might as you’re very open about everything on here! i was just wondering whether or not many people would see it as a security risk… as i said i’m being over suspicious… hopefully you find what you’re looking for in your price range anyway and that you get the 20k+ you’re looking for rom your condo!

  3. Dave Starr says:

    Looking good, guy. If you recall, I wasn’t keen on the condo idea when you went into that, although it seems it will work out alright from you. Fingers crossed.

    You’re right about the US property values in many cities. (I’m in Florida at the moment on a short trip to visit relatives … 4 years since I was in the US last and I am like a stranger in a strange land LoL).

    I gave some serious thoughts to some property investments here, because of the cheap, cheap prices, but after looking at everything involved in moving back to the US … including what I predict is going to be a much bigger mortgage foreclosure crisis this year or next, Mita and I have decided to keep our money in the Philippines for now. In particular the banking privacy laws and the stability of the banks compared to major US banks these days is just no contest.

    Anyway, just as a point of discussion, wouldn’t there be some tax advantage in Merendi Inc. buying the new property and leasing it to you? Maybe not, but the idea seems to have some appeal. Best of luck, Tyler.

  4. Jan says:

    Do you still have your girlfriend and if so, will she move in with you? Personaly, I think the benefits of condo living far out-weight a big house if you live by yourself. The maintnance and cost of keeping everything afloat is much greater. After knowing what I know now (having owned 3 different homes in the past 7 years), if I was single there’s no way in hell I’d live in a house.

    Also, you mentioned that your core biz is not making as much as years prior (many of us are in this situation). Is it really the right time to take on greater debt and responsibilities outside of the biz?

    More power to you if decide to upgrade but all I’m saying is that there are many negative factors to home ownership that realtor and home improvement sponsored HGTV shows do not point out.

  5. Joe says:

    Too bad houses cost so much where you live. Ever consider moving to where they are cheap?
    On another note, don’t forget that your heating and air bill will be astronomical in a large house. Are you going to clean it yourself? If not cleaning bill will be huge also. Plus yearly repairs need to be factored in also. In other words, the bills don’t stop at just the mortgage and taxes.

  6. Where I live you need at least 750k to buy a house

  7. Michael Kwan says:

    Be glad you’re not hunting in Vancouver. A single detached home easily fetches $700k or more.

  8. House #1 looks fabulous,Really i like it very much.My uncle is searching a house and today i got your excellent post.I will try to recommend him this article.Thanks for sharing , keep it up.

  9. Colby says:

    I’m in the same spot as you right now and looking to move from a condo to a detached home. Unfortunately, the prices hear in southern California are outrageous. My small condo will probably sell for around 480K and a small detached home will probably cost close to 700K.

    Best of luck in your search for a new home.

  10. Sunfrog says:

    I like #1. It’s small and cute. Why do you need grass?
    How much do houses cost in Canada? That kind of money would get you a big ass 5 bedroom house in Tucson.

  11. The Net Fool says:

    Good deal Tyler!
    Maybe you should consider refinancing the mortgage on your current condo and sticking it out another year there? I’m thinking that might be the best way to play it… but I do see home prices bottoming in the next quarter. Keep in mind that while I’m forcasting a bottom, that does NOT mean that prices will rise from there a whole heck of a lot, I’d say you are safe for 2 years before you see a notable jump up in home prices.

  12. teknoloji says:

    Have the seller pay closing costs, the economy is already bad, people are desperate to sell. At least its the case here.

  13. Congrats on starting your house hunting. It must be a very difficult decision to decide where you want to live and what you want to invest your money into. I’m also enviously looking at house prices in other areas. I live in Vancouver, but I’m not so sure I could afford to buy anything decent here.

  14. Regarding closing costs…

    CMHC you only have to pay if you put down less than 20% down-payment.

    Realtor fees are paid for by the seller, not buyer.

    Property Transfer Tax CAN be added to the mortgage unless you’re only putting down 5% then it can’t.

    Meaning, if you’re buying a $390k house and you were going to put down 10% ($39k) as a down-payment, simply put down $39k-$5,800 for your down payment, which brings down your down payment % to less than 10% but it allows you to effectively add the prop. transfer tax into the mortgage.

    Unless of course you were only planning to put down the minimum 5% for down payment. Then you’d have to add PTT on top of that.

    The way I like to think of it is that you need to have at least 10% of the purchase price for down payment, property transfer tax, legal fees, inspection fees etc. when buying a home.

    • Tyler Cruz says:

      “Realtor fees are paid for by the seller, not buyer.” <— said who?

      • That’s just how it works. The selling price of the house is the price you pay. The Realtor’s comissions are already included in that price.

        So if the Realtor’s commissions are $10k for example for a $300,000 house, the buyer gets only $290,000 and the Realtors (yours and theirs) split the $10k 50%/50%.

        Your realtor didn’t explain that to you?

        *Note: I realize that technically speaking since you’re buying the house you *are* paying commissions, but they are included in the price of the home just like when you buy a couch at Sears you don’t pay the sales guys commissions on top of that…it’s already in the price.

      • One other thing I wanted to mention is that when you go to sell your condo, just remember that the sales commissions for both agents will come out of the price of the house sold. Meaning, you as the seller pay them.

        Not sure if you guys have 1% realty up where you are but they have the lowest commission rates for selling real estate. Just FYI.

  15. Program says:

    I’m in the same spot as you right now and looking to move from a condo to a detached home.

  16. House #4 looks like a beast :)

  17. PPC Icon says:

    Remember your home is a business investment too, unless you strongly feel you want to live there for the rest of your life you need to be ensuring the property will very likely appreciate within a few years. Oh, and its worth paying extra for distance from the neighbours, bad neighbours can make your life hell.

  18. Mystic says:

    House #4 looks the best to me :)

  19. With these high realtor fees, I’m glad my girlfriend’s sister is a real estate agent. It should help a lot when it comes time to buy our own place. Hopefully she just accepts a nice dinner instead of a percentage of the sale.

  20. [...] single house of his own. He made this decision some time back, so now he is providing us with a house-hunting update. Wow, prices for some great homes in Nanaimo are quite a bit lower than equivalent homes in [...]

  21. Marksteve says:

    Tyler you did a really a great job man, i like the estates and houses, you have a really a exceptional and immaculate option.

  22. thats why i never and will never be affiliate of property, unless the standart commission raised

  23. Number 1 has a nice look to it.

  24. [...] day after I made my House Hunting Updates post, the Canadian Finance Minister, Jim Flaherty, announced some changes that are going to be put [...]

  25. nakliyat says:

    I live in Vancouver, but I’m not so sure I could afford to buy anything decent here.

  26. some great houses with views i guess, house no.4 is a beautifal house but needs a bit of paint and some exterior mods to make it look up to date, however if u live in the UK that house would cost about £450,000 and if in london it would be worth a few millions.

  27. Metin2 Hile says:

    Tyler you did a really a great job man, i like the estates and houses, you have a really a exceptional and immaculate option.

  28. Im not so sure I could afford to buy anything decent here.

  29. dubweiser says:

    Really interested in seeing how this merger affects the PPC platform. I think there are some pros and cons for both systems, so hopefully the new merger will take advantage of all the positives of both Yahoo and MSN.

    best of luck!

  30. So have you made your pick yet or are you still looking?

  31. Looks like you got some great options. ;)

  32. This is good advice for people searching for a house. Thank you for the tips.

  33. John Diver says:

    Hey Tyler,

    Just checking if you moved? Any pics or videos if you have?

    If you haven’t are you staying with the condo?

    • Tyler Cruz says:

      Still in the condo, but putting it back up for sale in 2-3 weeks. Market here has been very oversaturated with apartments so my place never sold, but I am really tired of condo living so I’m just gonna put it up again and take a loss on it.

PeerFly

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