I have been living in condos for almost 10 years. We started off with a 623 sqft 1 bedroom condo near the water. It was just my girlfriend (my wife) at the time and myself. We quickly adopted 2 cats and became really comfortable with our home. After enjoying life and our freedom we decided to have a child. We made the plunge as most of our friends were still busy going out to dinners and clubs. When Olive was born we lasted 6 month in that small condo before we had enough and wanted more space. You soon realize how much stuff it takes to raise a baby.
We decided to move into an up and coming area - The Junction Triangle and chose a condo townhouse as our new home. This townhouse was just over 1200 sqft and had 3 bedrooms, 2 washrooms and a loft area on the top floor. The thing that sealed the deal was the rooftop terrace with a gas line for the bbq! We knew from the beginning that this townhouse was not going to be our permanent home for too long. We would have to move within the next 4-5 years.
As our family aged we needed more space. Storage was non existence in the townhouse and we had more things than we should have. Our next search began as we wanted to stay in the neighbourhood. One thing that we knew was that if we waited any longer, we would have been priced out of the area. At the current appreciation rate the house that we wanted will be going up $70,000 to $80,000 each year!! The question was do we upgrade to the next house on the property ladder or do we suck it up and buy our “forever” house. The maximum mortgage a lender is willing to lend you dictates your choices. For us to buy the forever house, it would have to be a fixer upper, a little more north than we would like from Bloor St and possibly on a semi busy street. The last piece of the puzzle was to have a tenant in the basement apartment to help us carry the larger mortgage.
Just to give an example and keep in mind that these figures are made up for and are for illustrative purpose.
The townhouse that we were coming from had a monthly mortgage of $1650 including property tax payments and a maintenance fee of $350. This totals about $2,000.
The house that we purchased for $800,000 has a monthly mortgage payment of $2,100 and $300 for property tax. That’s a carrying cost of $2,400. We will be able to rent out our basement at $1,200 minimum (all inclusive). Assuming their utility bills are about $250 / month meaning we will still have $950 per month to add towards the mortgage. I know this is not a equal comparison to the condo townhouse as we didn’t include the higher energy costs for the house along with having to maintain and replace old components. But cash flow works much better at the new home, but will need to put money aside for maintenance. A good rule of thumb is to put away 1% value of the house each year for maintenance / replacement.
We are moved in and are currently renovating the basement.
To be continued...