Think back to the very first time you imagined yourself owning a home you could call your own. Did it have an apple tree out front? Maybe it even had an ensuite that could fit every member of your family, including quirky Aunt Suzy.
That vision of your first home was probably your dream. I mean, sure, it might not exist in reality, but we will never stop looking.
After all, for many first-time homebuyers, it’s hard not to look for the features that initially made us decide we would one day buy our own home. But should your first home be your dream home?
The only problem? For a buyer looking to purchase their dream home on the first go, you’re actually playing the odds. You see, on average, Canadians will own four to six homes over their lifetime. In other words, buying a home is not unlike buying a wedding dress, which takes someone between four to six gowns before they find the perfect fit. You may have to live in a few houses before the right one comes along. Not to mention, dream homes usually don’t come with an entry-level price range, which can often be a barrier for first-time homebuyers.
Jaymee Sisson, travel nurse and personal finance blogger, knew exactly what she wanted in her dream home. “It needed to be a newer home that didn’t require any maintenance or upgrades, have a big backyard, enough space to grow and be a single-family detached property.”
“I wanted control,” says Sisson. “If I were to buy a house at 25 and pay it off by 50, I would have a home without having to pay a mortgage.”
It was that simple. Or was it?
In November 2016, Sisson purchased her dream home with her then-boyfriend in Calgary, AB. Not even one year later, she had packed her bags and moved out of her own home after her long-term relationship came to an end.
“It was an emotional buy,” claimed Sisson. “I was in a relationship with someone for five years, and I thought that was it.”
What should you look for when buying your first home?
You likely have a laundry list of wants, and maybe (just maybe) aren’t ranking needs as the essential factors. Your dream home should be secondary to logic.
If you have to move five years from now, or less like Sisson, the last thing you want to do is play the odds. Perhaps you find a new job opportunity in a different city. Maybe you find the home you bought is too far from family (or not far enough). Instead, consider whether your list of desires includes realistic factors as opposed to making such a significant decision based on a big backyard and french doors.
Rather than focus on buying your dream home, you should focus on factors that ensure the first home you choose is a smart investment. What are those factors? I’ll tell you.
1. Find an established neighbourhood
But what on earth constitutes an established neighbourhood these days? Some key factors will help you determine whether the area you love works for you.
For one, consider how central the home is. The more central the property is, the more valuable that house and its land will become. In highly developed cities such as Vancouver and Toronto, prices are higher than smaller cities with lots of room to expand.
Take Vancouver, for example; according to the Metro Vancouver Regional District, in 2016; there were only 840-square-kilometres available for urban development. Assuming their predicted growth of one million new residents, this leaves Vancouver with a severely limited land base.
Aside from centrality, you should also look at the overall neighbourhood and whether it has good accessibility and amenities. Is there more than one way to get in and out of the community? Does the area appear to be well-maintained? Are amenities abundant? Ask a real estate agent who is familiar with that neighbourhood to find out any history of that community.
“What was the developer’s original vision, and what is the community like now?” says Gord Ross, Zolo real estate agent.
“Many times, developers start to build a neighbourhood based on a particular vision,” Ross says. “But soon after, they end up changing the entire direction based on feedback they receive from buyers.”
Real estate agents can give you history on which neighbourhoods have seen growth in the past and which communities will become more popular based on current numbers.
2. Look for sweat equity
Most people buy a home with the hopes that it will provide some return on their initial investment. However, that’s not always the case. To protect yourself and ensure that the home you buy has good resale value, look for a property that has sweat equity.
What is sweat equity? Well, first let’s look at home equity in general. If your homes current value is $450,000 and the mortgage balance is $50,000, you have $400,000 of equity in your home. This number may go up or down based on the real estate market and the balance you owe on the mortgage. Two other factors that determine your overall equity are general upkeep and home improvements, which is where sweat equity comes in to play.
To increase the property value or to increase the likelihood of an easy resale, it’s a good idea to consider additions to the home or to improve the overall look of the house.
Ross says that when choosing a home, many first-time buyers are much too focused on small features that are easy to fix – such as granite or paint colour.
“Changing the exterior of the house can be difficult, but small interior changes can be easily fixed,” says Ross. “Especially if the home is perfect in every other way.”
The labour that you contribute to maintain your property – whether through a general contractor, designer or your sweat (hence sweat equity) – increases your overall investment.
3. The price has to be right
Before you buy a home, you need to consider every detail before you sign on the dotted line. To ensure it’s a good real estate investment, calculate how much money you have, the amount you’re eligible to borrow, and how much the home will cost – with and without renovations.
You also want to keep the cost of maintaining the home in mind. If you were to resell the property five or 10 years from now, try to estimate the price you’d be able to list the property. An estimation of future value can provide a good sense of whether you will profit from the home should the unexpected arise and you’re forced to sell earlier than expected.
In February 2018, not even a year and a half after she bought, Sisson attempted to sell her home. “I couldn’t even get what I paid for it.”
“The market wasn’t doing hot because of the mortgage stress test, and I think the location was difficult for people because it was in a suburban community.”
Nowadays, Sisson considers resale value and looks at buying homes from a more logical perspective.
I can relate. More than a dream home, purchasing a property that can grow in value and has room for sweat equity is of great importance to myself and my husband. Although we would love to stay in the same house forever (ideally, who wouldn’t?) it isn’t always realistic to think that way. Any home can be a dream home if you buy with your head instead of your heart.