My Next Big Toy: A House

December 17, 2009 Posted by Tyler Cruz

I bought my condo nearly 3 years ago, which is the first home I’ve ever purchased. Before that, I was renting an apartment.

When I bought this place, I figured that I would probably live here between 3-4 years before transitioning to something bigger and better. While I am indeed now in that stage of wanting to move onto something else, I had pictured that I would have paid off much more of my mortgage by now than I actually have.

My original plan was to try to pay off my mortgage as fast as possible, putting lump sum payments directly towards the principal and squeezing as much as I could to put back into it, but the truth is that I haven’t made a single payment other than my regular bi-weekly payments, and my original down payment wasn’t very much either.

As a result, I still owe a lot of money on my mortgage. So why then, when I still owe a lot on my current place, do I want to buy a house that costs 2-3x as much?

Condo Living Can Get Old Quick

My condo was great at first. It was a nice step up from the place I had been renting as it has its own laundry room, an additional room for my office, 2 bathrooms, is brand new, and even has air conditioning (one of perhaps only 2-3 condominiums believe it or not).

But there are many things that have really started to get to me recently.

Neighbours

Living in a condo really restricts the types of activities that I can engage in. The older lady underneath my office is super-sensitive to sound which means I have to literally tread lightly at night. And being nocturnal most of the time doesn’t help things. She has already come up and spoken to me 2-3 times, even though I’m seriously one of the best and quietest neighbours you could ask for.

Strata Council

Strata councils are absolutely ridiculous. A few Seinfeld episodes summarize them well. Since my building is one of the more expensive condominiums in the city, most of the residents are old. In fact, for a while I think I was the only person under 30 living here.

With the resident age being higher, it means that council tends to vote and pass on things that I would never want. For example, they agreed to spend $1,000 to clean the underground garage. What you need to realize is that our underground garage is already sparkling clean.

They are also clinically obsessed with security, wanting to constantly change locks and install new security cameras, etc.

I’m paying around $250 a month on strata fees, so it’s annoying that my money is often spend on such things.

Stupid Things

There are small stupid things about living in a condo that you might not even consider. For example, my condo has this stupid built-in smoke alarm detection system that is pretty fancy, but also extremely annoying. It is insanely sensitive and will go off with the slightest bit of burnt small.

It’s ear-piercingly loud and is really hard to turn off since it’s built into the unit. In fact, I’m half-convinced that you can’t turn it off, and have to try to clear the smoke as best you can instead.

As a result, I rarely bake at night even though that’s my daytime. Using the toaster at night would be neighbour suicide.

Mail Delivery

I know this sounds like an absurd thing to list here, but it really is a pain. In the past few weeks I received 4-5 courier packages. For some reason (I think it’s because I’m located early on their route), they like to ring my buzzer at 7 in the morning. I’ve usually just gotten into bed at that time time, and almost always miss it.

I then have to go and pick it up or call and arrange to pick it up, which is just a stupid hassle. If I had a house, I could have a sign for them to just leave it somewhere by the garage.

It’s small things like this which can add up.

No Dogs Allowed

I love dogs and really want a dog (or two). You may recall how early this year I donated money to the local SPCA and ran a fundraiser for them (thanks again to those who helped donate!).

Now, I am allowed a dog or couple cats here (I’m not a cat person), but the council bylaws restrict me to having a very small dog, and I’m not a fan of small dogs. I want a big dog that I can play and roughhouse with. I’ll take the 2 dogs below please (perfect!):

66

And the only way I can make that happen is if I buy a house.

House Hunting

Over the past few weeks my yearning for a house has really started to increase. I’ve been watching scores of House Hunters, Property Virgins, and My First Place episodes from HGTV to get into the mood, and have scoured MLS for properties.

There is one in particular that really tickled my fancy. It’s far above what I can smartly afford, but it seems like a great price for what you get. Here are a couple photos from the realtor’s website:

64

65

It’s on an acre of property and has a 3-car garage, 5 bedrooms, 3 bathrooms, and is around 3,500 square feet.

Even if I was somehow able to afford this place, it would be at the extreme tip top of my budget. But it’s such a beautiful home!

Being more realistic, I of course looked at places more within my budget. There are a number of decent houses here within a range that I might be able to afford, but it’s amazing how much better of a house you can get for every extra $100,000 you add. Maybe it’s not amazing, but it’s sure food for thought. After all, an extra $100,000 only works out to $333 a month with a 25-year amortization schedule (assuming no interest, hah).

I even e-mailed my mortgage broker to see what type of property I can afford now. I should be hearing back from her within a day or two.

The bad news is that since purchasing my condo, I have since incorporated and am now on a salary of only $42,000 net a year. A rough rule of thumb is that you’ll be approved for roughly 3x your income. That works out to only $120k! When I originally got my mortgage, I was personally receiving 100% of what my sites were making. But since I’ve incorporated, I set Merendi Networks Inc. to only pay me a salary of $3,500 a month (net) in order to save on taxes. So when I applied for my current mortgage I was personally making $100,000+ a year which dramatically increased what I was able to be approved for.

The good news is that my current mortgage is my only debt, and I should have a perfect credit score. My condo has also appreciated $35,000 since I bought it (comparing with 2 units listed on the floor below me).

Your House is Not An Asset

I’m fully aware that a house is not an asset (unless you’re renting it out)… I’ve read Kiyosaki.  And I don’t want to be house poor.

I also know that buying a big house is one of the stupidest things you can do if it’s not really within a safe budget, and can dramatically slow down your growth business-wise.

But at the same time, I really want a house. Since I work at home, I spend the vast majority of my time here, and for the most part I’m a homebody so to me a house is very important.

I also feel that I have put back in far more money into my websites and entrepreneurial projects than most people would have, and therefore feel a sense of entitlement into splurging a bit. This isn’t to say that I haven’t already treated myself, because I certainly have, but I really have invested a lot back into projects.

Basically, I know that my business side is telling me that buying a house isn’t the fastest road to riches, but my personal side is saying “what’s the point of making money if you can’t enjoy it?”.

Could Be a Pipe Dream Anyway…

In any case, I’ll have to wait and see what my mortgage broker estimates my pre-approval to be first. If it’s the range I think it will be, then I’ll most likely have to wait another year or two before looking for a house again, as I want to buy a place that I’ll be happy with for at least a few years, and I know I wouldn’t be happy with what’s available here in the smaller price ranges.

But if I’m wrong and am pre-approved for something larger, then I may indeed be house-shopping soon…

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Posted: December 17th, 2009 under Personal  

63 Responses to “My Next Big Toy: A House”

  1. Jeff says:

    Hey Tyler:

    Interesting article. You’ve summarized of the strata issues most of us condo-owners face. Sorry to hear you’re by-passing on the small dogs. I was a little concerned at first, having had an old english sheepdog and a yellow lab before, but I love my little Miniature Schnauzer.

    He’s a wild and playful dog, even at 3 years old! Look for “rumble freakout” on YouTube – his name is Rumble. He’s a hoot!

  2. I hate my smoke alarm… I have the EXACT same problem… As for the package issue, my building has a concierge… they’re very handy for a ton of things and is an option if you end up upgrading into a bigger condo.

  3. haber says:

    That house sure looks good, condos sucks, I totally know how you feel! (Especially the old lady issue. LOL.)

  4. Muzi Mohale says:

    I prefer a house to a condo, you have all the freedom, without the rules and annoying neighbours. Move on to enjoy your space Tyler…you deserve it.

  5. Becky Marie says:

    Congrats Tyler ! The house in the pic looks amazing, But your smart to not stretch yourself to thin! I never understood condo living. If your going to live in a condo why not just leave in an apartment??

    • Tyler Cruz says:

      What’s the difference between a condo and an apartment in the US? As far as I know, condo implies ownership while apartment implies rent, but I could be wrong…

      • Jones Berg says:

        Condo: high end apartment with security/concierge/maintenance staff
        Apartment: Just a bunch of units with the super dropping by once a month to collect the rent

        • Tyler Cruz says:

          Mines somewhere inbetween since it’s a smaller building. I remember in Korea they had security guards every floor. I also distinctly remember walking past one who was sleeping, haha.

          • Brian says:

            No, the difference between a condo and an apartment is you rent an apartment but do not have any type of ownership. A condo you own (you receive what is known as a unit deed and the owner’s of the entire development have a master deed). You are free to do whatever you want to do inside your condo and have all of the “bundle of rights” so long as it’s within the bylaws of the community. An apartment does not afford you any rights other than what is in the lease.

            How “nice” it is has nothing to do with it. There are apartment complexes that have security, are beautiful, etc., and condos that have neither.

          • Tyler Cruz says:

            To Brian: So I was right in the first place then ;)

            Sorry, reached the maximum child thread level.

          • Brian says:

            Yep, you were right, that was supposed to be in response to the other guy! :)

  6. Go for it Tyler. It is hard to believe that you made it 2 years considering the conditions you have to live under when you own your own condo. You have the same problems an apartment renter would have.

    • Tyler Cruz says:

      It’s just 6 weeks away from 3 years actually.

      It’s actually not terrible, but it certainly has its drawbacks as mentioned above. The only downside to owning a house that I can see is the added core of maintenance (I’m not looking forward to mowing the lawn), and possibly the extra heating/cooling bills due to the large size increase… but there are far more cons to condo living.

      I think condo living is much better suited for the elderly :)

  7. John says:

    Tyler Good Luck. I am in a Co-Op outside of NYC currently and looking to move to a townhouse. Co-Op is a cooperative where the owners all own shares in the complex. Similar to a condo with more rules about what you can/cannot sue to your unit. They are also cheaper usually. I have no desire for a house yet because of the upkeep – lawns, maintenance, repairs, etc… With a baby on the way in 13 days and the market tanking I’ll probably have to float my current place for a few months until it sells or rents. Don’t be house poor…worst thing you can ever do.

  8. Adam says:

    Big house = big bills.

    It was interesting to read your post Tyler. I’m in a similar position to you as in I want a house (in the uk so prices are high) but I know it will impact my business. It’s a hard decision to make.

  9. maybe having your own house aside from being free of what you want to do is the expenses, maintenance and other things…Not sure, though.

    But the house is pretty cook tyler! Congratulations in advance (lol)

  10. Brian says:

    Hey Tyler – A house can be a wonderful thing, but you’ll be smart not to bite off more than you can chew. A couple of things come with home ownership – first, it’s way more expensive than you think. It’s not just the mortgage or the utilities. But also any time ANY thing breaks – you have to foot the bill. Little things like heating and cooling maintenence, light bulbs or fixtures, toliets and pipes…everything falls on you. If you are pretty handy, it shouldn’t be a problem – but if you are not – you should add $100-$200 a month to your budget for miscellanious expenses. If you decide to buy an older home (3+years) add another 250-300.

    Thankfully, I’m able to share these expenses with my spouse. Since she works we were able to afford much more house than we would have been able to alone.

    Another thing to think about – you may want to adjust your income from your company to help you afford a bigger mortgage. Here in the US, you can deduct part of your mortgage intrest from on your income taxes. Don’t know if this is the case in Canada. If so, it would be a wash taxwise.

    Good luck!

    • Tyler Cruz says:

      I already have to pay those thins in my condo… I’m not renting… I own it. But I agree in that there are more things that can go wrong with a house than a condo (roofs being one of them).

  11. Jones Berg says:

    Will you sell your apartment or lease it out?
    -If you do sell will you make a profit on it

    The house looks nice

    • Tyler Cruz says:

      I’ll definitely sell it, I need all the money I can muster! Yes, I’ll definitely make a profit on it ($30-35k most likely), but that doesn’t really matter since the house I’d be buying would have appreciated in value as well…

  12. trigatch4 says:

    You’ll find just as many things annoying about owning a home if you don’t think things through before hand. Mowing the 1 acre of lawn? Shoveling your driveway/walkway when it snows? Having to hire a plumber or utility person instead of calling “the front desk”?

    Think it through before you make a move. Owning a home is much more involved than owning a condo. You can no longer pass off “the little things” to other people and are forced to take full responsibility of every little issue you’ll ever face.

    • Tyler Cruz says:

      Yes, that’s the biggest downside. I’m so not a handyman it isn’t funny. And while I hate mowing the lawn, I did actually use to mow my grandma’s big, lumpy, awkward lawn way back in the way so I’m at least aware of what it entails…

      But yeah, the maintenance stuff will certainly be a chore, I’m sure.

      I was never able to call the “front desk” before though… I’m not sure what type of condos you have in the US but they sound rather interesting from what I’ve read in the comments so far…

  13. Turkey says:

    I prefer a house can move freely comfortable.
    Meanwhile, the house looks beautiful.

  14. LukePeerFly says:

    I hope after I graduate and get a solid salary going to purchase my own home. My mom just recently bought her first house. I don’t plan to wait that long :p

  15. Michael Kwan says:

    Seems like several of the “Dot Com Pho” crew (if we include you) are going to be in the housing market within the next year or so. John will probably be ditching his rental property in West Van to buy a new house after the Olympics. Stephen is about to list his Port Moody condo (moving in temporarily with his parents) so that he can buy a bigger/better place in the new year. And now you’re looking to upgrade too. If things go according to plan, I should be jumping into the market with my girlfriend relatively soon too. Exciting times.

    On a side note, I totally dig HGTV. Property Virgins, My First Place, and House Hunters are fun shows. Watching Designed to Sell and other similar shows are also great, since you can better see the potential of properties that may otherwise fly under your radar.

    • Tyler Cruz says:

      Yeah they’re fun to watch and really get you “in the mood”. House Hunters International is neat to watch as well since you can see what you can get in other parts of the world, outside of North America.

      It’s amazing how cheap some areas are… I noticed that Chicago is very cheap for example.

  16. Roray says:

    Buying a house in this market may just be the biggest mistake you can make. We are far from the bottom of this so called “recession” (read: depression), and the housing market is only temporarily riding a wave of nothingness. Wait a year, when the market is so far in the toilet people don’t remember what appreciation was.

  17. Jon says:

    Tyler, are you sure your condo has increased around 15% since you purchased it?

    You bought around the peak of housing prices and most of Nanaimo’s median property values are down-to-flat since ’07.

    The 2 units listed for-sale are not comps — you need to look at the last 6-months sales history in your building for accurate valuation. Those 2 units on the market are your competition and you’ll need to be priced below what they are listed if you want to sell… not at the same price point.

    • Tyler Cruz says:

      Yeah, I’m only basing my assumption on their listed prices.

      How much they will actually sell for is another story. I could probably knock off $10k off their listed price. Even being conservative and knocking 15k off still gives me an increase of around $20k though. That would most likely go towards the PPT and realtor fees on my house purchase though, heh.

  18. Im in the same position. I live in an apartment in the middle of the city which i thought would be super handy for almost anything. If i need something for my computer or a particular cable, or anything for lunch, can just walk out my front door and its all there.

    But working from home means all the walls creep in around you. Not to mention my neighbours play the loudest music possible throughout the day. Which i cant really complain about since music at midday would usually be fine if i didnt work from home.

    Looking to move out towards the beach soon. A nice view always increases my work productivity

  19. I still living in a condo, and I hope I can have enough money to buy a confortable house for my later life, condo living indeed horrible.

  20. EarningStep says:

    great house . look very nice. it’s perfect house plus two lovely dogs

  21. To calculate your income as it applies to your loan, you add your base salary + dividend revenue from your corporation….it’s not strictly your base salary.

  22. Jon says:

    The monthly cost of owning a home more than double usually. I’m guessing your bill for utilities such as water/sewer/garbage/power isn’t much at the moment. You will definitely want to call the utility company and ask the current owners of the home how much their average monthly bills cost.

    The cold winters can REALLY add to the cost of your natural gas or electrical bill. When I was living in a 800 sq ft apartment my power bill at the most would run only $30 a month during the cold months — that would include power AND heat. When I bought my house (2500 sq ft) my natural gas bill can hit $400 for ONE month during the winter… then I also had an electrical bill on top of that!

    As you already stated yourself you aren’t a handyman, I would look into maybe a townhome with 2 floors and nobody underneath, has a small yard and allows pets. Or avoid a large house like you posted and get a small 2-bed house with a little yard for the dogs. Yardwork sucks, IMO. I know some people enjoy it but not me!

    • Tyler Cruz says:

      Where do you live Jon?

      I considered a townhome, but I still run into some of the issues I have with the condo. And then I’m still paying the strata fees… it’s also rare to find a townhome with a decent-sized yard. Although I did find one, it would require putting up a fence, and that’s an added cost + I would have to see if the strata even allows it…

      There’s no way I can afford the house I listed above. That was just a dream home. Realistic houses within my range fall within literally half that price, haha.

      • Jon says:

        I’m about 5 hrs south of you in the Puget Sound area.

        Not sure what your utility and natural gas prices are like up there but they are likely similar. Your climate is a bit colder and the winter season lasts a little longer though.

  23. Paul B says:

    Having the extra bills to pay can be a great motivator :) There is nothing quite like a £400 ($600+) gas bill to make up your mind as to whether you should spend an afternoon on the x-box or on your campaigns. Throw a wife and kid into the mix and all of a sudden you’ve got all the motivation you could ever need to grow your business! Works for me anyway.

    Just be careful of the double dip and don’t stretch things beyond reason. The double dip is coming, interest rates can’t stay like this forever and there just aint the government money to prop things up for much longer.

  24. Yeah, actually, a house that is paid off or that you have lived in for a while does become an asset because it will always increase in value as time passes. I bought my house in Oklahoma (obviously a different market than probably where you’re at) roughly 8 years ago. I wish I would have put it on a 15 year note, but I put it on a 30. Still though, my house is worth about 15 – 20% more than what it was when I bought it. I’ve only made relatively minor changes to it. I had it appraised again a couple of years ago.

    Obviously, I’m paying to keep ahold of it right now, so there is some debt there. That doesn’t mean that I couldn’t get my money out of it if I had to though.

    • Green Giant says:

      As an investment, 20% appreciation over 8 years is rather low but the real question is did you factor in all the money you spent on your house such as taxes paid, interest payments on your mortgage, maintenance costs, closing fees, when buying, etc

  25. Interesting post Tyler. I am in a similar position, except that I am still renting instead of paying off a first mortgage. I would love to buy my own place to get freedoms like the ability to get a dog. Unfortunately I probably wouldn’t be able to afford a house yet. So I’ll probably end up getting my own condo or apartment.

  26. I’ve been looking at getting a new place too so I am excited to see what they will approve you for with a smaller salary. Keep us updated.

  27. John says:

    Your house is an asset. If you sell it, you will make money. Just as if you sell some stocks, you will make money off of them.

    Check out this link (careful, very sales-y): http://johntreed.com/Kiyosaki.html

    • Paul B says:

      And it’s EXACTLY that thinking that caused America to fuck over the entire worlds financial markets. Round of applause for America please and their “house is an asset not a home” attitude

    • Tyler Cruz says:

      I don’t agree with everything Kiyosaki preaches, but the home where you live in not being an asset is one of the things I do agree with.

      Remember too, that sure your house can appreciate in value, but where are you going to move? If you stay in the same area, all those houses are going to have appreciated as well…

  28. It was interesting to read your post Tyler.

  29. I prefer a house can move freely comfortable.

  30. starbort says:

    Words to live by = live below your means always.

  31. tattoo kits says:

    Another very cool post Tyler – I am currently renting an apartment in NYC so i totally “feel your pain”

    The next move for me , I want a farm out in the country

    Good luck with your house hunting!

    AL

  32. Joe says:

    A house can be a burden or an asset. I have two houses that have been a pain in neck for about 10 years. This was back when I was going to be a “real estate” guy. Its great for some and I can see where your coming from. Just make sure you can sell the thing quickly just in case.

  33. Derek Baker says:

    Cool post Tyler, how much does the house you posted pics of cost? It really is beautiful. Keep us posted if you end up debating between a few hours we can help decide :).

  34. I feel your pain about the small dogs , I have a 18month old Staff/Pitt Mix Girl and Im very happy I got her.

  35. Program says:

    That house sure looks good, condos sucks, I totally know how you feel! (Especially the old lady issue. LOL.)

  36. I feel your pain about the small dogs , I have a 18month old Staff/Pitt Mix Girl and Im very happy I got her.

  37. VHS to DVD says:

    Buying a house and having your own piece of land is certainly enticing. I live on 12 acres on a river in North Central Washington, probably about 3-4 hours from Vancouver during the summer (when we don’t have snow on the ground lol), and wouldn’t trade it for the world.

    But seriously, as an entrepreneur, you need to plan out ANY personal expense you take on extremely carefully, but especially your house which may be your largest expense in either your business or personal budget. As the owner of your own company, your house is a business expense – you will need to pay its owner (you) money to cover the payment…money that could otherwise be spent on an employee, additional advertising, etc. I know that it has seriously hampered my ability to react as nimbly as when I was renting, and my business has had to take on additional debt/investment as a result.

    That being said, I’m a large-dog person as well and would never be able to have my three dogs (Border Collie and 2x Catahoula Leopards) in a condo/apt, so I can understand the urge to get your own place. Good luck in your hunt!

  38. [...] 14, 2010 Posted by Tyler Cruz Paid Advertisement A couple months ago I posted how I was tired of condo living and ready to buy a house. I was serious about it and have been scouring the MLS nearly everyday since then, looking at [...]

  39. hacetsizlik says:

    It was interesting to read your post Tyler (:

PeerFly

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