HGTV’s Scott McGillivray sits down with Mediaplanet to discuss the importance of utilizing all available resources when looking to purchase your first home.
Mediaplanet: How important is research for first-time condo buyers when entering the market?
Scott McGillivray: Very. It’s important to know the rules and regulations of the condo board for various reasons. For instance, first-time buyers who are struggling financially may want to use a service like Air BnB to rent it out on the weekends, and some condo boards don’t allow that. In fact, many restrict the number of tenants allowed in a year.
What are some considerations for a first-time condo buyers looking to use the property as an investment vehicle?
There’s a lot you need to know if you’re investing. Obviously you want to know the rules for reasons as you may not be allowed to use it as a short-term rental. But also, if it’s a pre-construction, you need to be aware that the occupancy date and ownership dates can be different. Purchase agreements often have restrictions during occupancy periods that state you can’t sell and can’t rent until you take official ownership. If you’re counting on rental income during this time it can really cut into your profits. If you’re buying it as an investment property, I suggest trying to negotiate this into your contract.
What are some things buyers should keep in mind if they’re considering purchasing a pre-build?
With pre-construction condos you have to be prepared for big delays in the schedule. I suggest planning to move in six months later than the original move-in date, and have an additional backup plan just in case. You also need to be aware that the closing costs may be higher than with pre-built condos. They can include everything from development charges to initial utility hook-ups. They’ll always vary by building, but do your research ahead of time so you know. And keep in mind that any money you pay once you take occupancy, but before you take ownership is paid to the developer — it does not go towards your mortgage.
What common mistakes do first-time condo buyers make? How can they avoid them?
Forgetting about maintenance fees is a big one. The purchase price is only one part of the cost, and in some cases maintenance fees can be even higher than your mortgage payments. You need to factor the existing fees into your budget but also be aware that they can go up every year, so give yourself a bit of breathing room. Also,you still have to pay property taxes with a condo. A lot of people mistakenly believe that you don’t.
What is the value of seeking advice from an organization like the Condominium Authority of Ontario?
Knowing your rights and responsibilities is never a bad thing. Since owning a condo is different from owning a house it’s a good idea to learn how things work. You should know how meetings and voting work, you should learn about your condo’s reserve fund and where money is being spent, what to do if you want to rent it out, and so on. It’s there to help you and protect you, so you may as well use it.
What are the benefits of purchasing a condo over a townhouse, or apartment?
They all require you to pay into some board or association, but the frequent benefit of condos is that they have more amenities. So if you’re looking for things like a pool or gym, a condo is usually the way to go. But keep in mind that you pay for these things in your maintenance fees.
How important are condos to the future landscape of Toronto?
They’re the future landscape of Toronto. These days it’s the only affordable way to live downtown, and with the way prices are increasing, it’s getting even harder. But it’s the reality. For the sake of the preservation of land outside the city, we absolutely have to build up.
What are your top tips for First Time Buyers?
Plan your budget and get pre-approved for financing before you start looking. Buying your first place can be emotional and it’s really easy to spend more than you can afford. It’s tough in a city like Toronto where prices are so high, but do your best not to buy at the top of your budget. Leave yourself some breathing room for things like repairs and increased maintenance fees. There are a lot of costs that you have to incur when you switch from renting to buying, so be prepared.