The Millennial Real Estate Playbook - How To Move Up The Property Ladder - The Storey Team : Toronto Real Estate

The Storey Team : Toronto Real Estate

The Millennial Real Estate Playbook - How To Move Up The Property Ladder

05 March 2018
Tom Storey

I purchased my first property in July of 2015. At the time the average condo price was hovering around $400,000 in the GTA. I had been saving up for over 2 years for the down payment. I did not want to rent... as that’s essentially putting money into your landlords pocket. Fast forward to March 2018 as I’m writing this blog, and the average price of a condo in the GTA is $550,000 (and if you're looking in the downtown core it’s $630,000). Purchasing that first condo has helped me move up the property ladder over the past three years. I now own several properties (some with other investors) that have all appreciated in value, but most importantly they're all rented out with my mortgages being paid down, while I’m building more equity. 

This is the first condo I purchased in 2015 for $360,000 (Today's market value is around $480,000)

So why is it important to get into the property market in your 20’s and 30’s in Toronto? 

1. You need somewhere to live: You have three choices, you can rent, you can own or you live with your family. I lived in my parent's basement until I could afford my first down-payment. It sucked, but looking back now was one of the best decisions I ever made. If you rent, you’re paying down your landlords mortgage and helping them build wealth over time, I want YOU to build wealth over time. 

2. Toronto is becoming a Global city: Do you know what most global cities have in common? They're really expensive! From 2008 until 2018 prices in the GTA have gone up a total of 108% - averaging 8% growth a year. To put that in perspective, on a $400,000 condo purchase that’s a yearly appreciation of $32,000 - not to mention the fact that you have also been paying down your mortgage. 

3. The pace in which the market is moving: If you’re saving to buy your dream home, that’s perfectly fine. Just make sure that you're saving at a rate that's on pace with how the market is moving. I see this all the time, people want their first property to be their dream home. Problem is, we don’t have the opportunity to buy a detached home as our first property anymore (well unless you're ready to spend 1M). The best and maybe only way to get to that dream home one day is by starting small and moving up the property ladder over time. Buy that first condo, and after two years you can jump up to a townhouse, and 3 years later you will have enough equity to get that freehold home. 

4. Look at your parents: If your parents own a house, there is a good chance it’s fully paid off by now and will be a large portion of their retirement plan. There is now more competition then ever and fewer homes to choose from... that's why it's so important to get in young.

5. Leverage the bank's money: If you buy a condo for $500,000 and put down 20% that’s a $100,000 down-payment. The $400,000 that the bank is lending you, well you get to see the appreciation on that money as well. 8% growth on $100,000 each year is great! But you’re actually getting 8% on $500,000. 

We could go back and forth on the stock market vs real estate debate forever, but at the end of the day shelter is a necessity in life and you may as well be the one who owns the roof over your head. Buying your first place can seem scary, and a big life decision but if the past is any indication of where the future of Toronto real estate is going.... well I want to be a part of that and so should you. 

Tips on how to get started

Understanding what you can afford: Get pre-approved by a mortgage broker or your bank. This doesn’t mean you have to buy anything, but at least you will know what you can afford. Speak to professionals: Realtors, Mortgage Brokers, and Lawyers are on your side. Pick the people who you trust most to help you make this decision. Take a deep breath: Buying your first property can be stressful, but I can tell you from personal experience it's the best financial decision I've ever made.