GenZers are the next homebuyers. If you were born between 1997 and 2012, you’re coming to the market when things are a little crazy. With interest rates rising and home prices in the stratosphere, it may feel like you’ll never be able to own your own home.
KT Realty owner and Realtor Ariel Kormendy speaks with Mily, a GenZer, about how to help her and others get into the real estate market.
Here are some highlights:
Buying Real Estate to Rent and Renting Where you Live
The key to getting into the market is broadening your horizons and looking for real estate opportunities outside of where you live.
If you reside in the GTA (Greater Toronto Area), it’s not uncommon that you’ll be priced out of the market. But maybe you can afford a home in rural Ontario or out of the province where real estate is more affordable.
That doesn’t mean you have to live there. You buy a property in a place you can afford, rent it out, and then rent where you want to live.
Real estate will be among your best long-term investments, and it can also be used as a stepping stone later, leveraging the equity to buy something you want in the neighbourhood you would like to live in.
Benefits of Having a Real Estate Agent Help You
The benefits of having a professional real estate agent help you are huge, and it costs you nothing! As a buyer, you’re not paying to have a real estate agent help you make the purchase; their compensation comes from the listing brokerage. A real estate agent’s insight into the market, negotiation skills, and ability to navigate the process will be invaluable.
Ariel’s Take on Renting vs. Buying Real Estate
If you’re not currently in a financial situation where you can afford to buy now, look for ways to make it happen two or five years later.
For GenZers, it probably means living at home longer than you’d like. If you’re in your 20s, you could live with your family until your late 20s or early 30s. Think of it as an incentive to save and not splurge.
Alternatively, consider joint ownership. Find a friend or family member to live with, or buy a duplex or a house with a legal basement apartment to subsidize your costs.
Ways to Cut Down on Expenses
Spending money on wasteful things is easy when you live at home and work full-time. Consider ways of saving money with little impact on your lifestyle.
Here are some easy ways to save money:
- Pay your credit card off every month, and never carry interest
- Avoid daily trips to Starbucks
- Brown bag it instead of eating out for lunch
- Shop your favourite looks for a fraction of the price at stores like H&M
- Contact your cellphone or car insurance provider to negotiate lower fees
- Check out our free money-saving tips guide for 37 great ideas
How to Make the Money You Save Work for You
Once you start thinking about it, there are many ways to spend less, and the money you save can be put into an RRSP. The government’s RRSP plans allow you to take the money out tax-free. Consider getting an RRSP loan; the tax savings will put a few thousand dollars into your pocket during that tax year.
What Happens If You Don’t Get Approved for a Mortgage?
You need good credit, a steady job, and some money in the bank to get a mortgage approval. If your credit rating isn’t excellent and you’ve missed payments, there may still be lenders who will provide you with a mortgage, but you might be paying a higher rate. If you don’t get approved, find out what you can do to fix it, and devise a game plan to put yourself in a better position for a year or two.
Credit Scores & the Importance of Building Credit for GenZers
- If you’ve never had a credit card, go get one, and learn how to use it properly.
- Pay for everything with your credit card, and pay it off before the due date so you don’t owe any interest.
- Don’t close any credit cards because it will affect your credit score. The longer your account is in good standing, the better your credit will be.
- Look at your statements going back several months and see where your money is being spent. Ask yourself, is this something I need? Make sure you can pay back whatever you’re spending, ; if you can’t, don’t buy it.
Mily had 21 Real Estate Questions for Ariel. Watch the full podcast.