“I need to save up $7,500 in six months or else I’m going to lose this condo that I invested into.” – me in 2009
I was lucky enough to get into real estate at a young age. I knew that I wanted to be a property owner when I was 17. When I started working full-time hours eventually, I began saving up for a property and I didn’t stop until I had my first condo technically by 20 (I didn’t get the keys until many years later). It wasn’t easy at the time, but it was worth it and I want to show you how you can get started in real estate right now if you’re looking to get into the market even if it feels impossible.
Keep on reading if you want to see how I got started in real estate, the differences in the real estate market now, and how you can start today if you’re looking to get into today’s confusing real estate market…
Have you been looking to get into real estate? Do you want to buy your first home?
I remember telling my buddy Greg back in 2005 that I wanted to buy a property before I ever purchased a car. Don’t ask me why, but I was stubborn about the property idea. I was a greedy teenager who read a bunch of books on real estate and personal finance. I figured that real estate was the way to go for some reason (the stock market seemed too stressful). Then I told myself that I had to make it happen. So I worked multiple jobs, read every book on the topic, and did whatever I could so that I could finally purchase a property.
I also had absolutely perfect timing when it comes to this stuff. I wouldn’t have been able to pull any of this off had I been born 5 years later or if I didn’t read the right book at the right time.
Times have obviously changed since then, but this doesn’t mean that you should give up on the idea of real estate.
I’m going to look at how I started in real estate and how I would start today for all of the young investors out there who want to get into the real estate market.
How did I get started in real estate?
I got into real estate with pre-construction condo developments in Toronto.
I would spend my spare time from college walking around downtown Toronto looking for condo development offices to check out. During the summer of 2007, many properties started going up in the city. They would sell them first through offices where they offered blueprints of pre-construction developments.
My buddy Marion and I would use our four-hour break in between classes (so annoying) to walk around looking at properties while trying to figure out where the best spots to go out were around campus. We would also walk into the offices just to see what the projects looked like. It was inspiring to see the blueprints and to look at the math behind real estate. We would look up the price of the condo and then try to compare it to what you could make in monthly rent to see if it was worth it or not.
I eventually took every penny that I could save and applied to purchase my first pre-construction condo.
I honestly have no idea how I was pre-approved for my mortgage. My parents didn’t help me. I had a decent gig at the time with full-time hours since I was in community college and I had some savings behind me. I guess that I was able to prove that I had money saved and money coming in. I also had been with this bank since I was a child so they figured it was a good idea to give me a mortgage pre-approval.
So what happened with the condo purchase?
I was set up on a payment plan and I had to look for extra work so that I would have this money. I had to put up $7,500 upfront and then make two more payments along with a final payment on closing one like 3 years or whenever they finally closed the project.
I essentially purchase my first condo with only $7,500 saved.
How do these pre-construction property purchases work?
You buy the condo based on blueprints provided by the developer. You look through the website, make an appointment, and then go in to look at the availabilities with that project.
These days there’s a waiting list and it’s much easier to find out about an upcoming project. I’m currently on a bunch of waiting lists for condo developments around Ontario.
I took a risk by buying into a printing factory in a developing part of Toronto (Queen East). It was a pretty scary investment looking back. I truly believe that I was the right mix of delusional and optimistic about this.
Why did I think that a loft in an old printing factory would work? Why did I invest in an area that I knew nothing about?
I wish that I could tell you that I ran some detailed calculations. I was just more into taking risks back then. I also had it ingrained in my mind that you couldn’t go wrong with real estate. I consulted with a family friend who shared his thoughts on why he loved real estate investing. I also figured that by the time the condo project was completed, I would have a full-time income coming in which would make it easy to get approved for the mortgage.
What are the pros of a pre-construction condo?
- You don’t need to have all of the money upfront.
- You go through the mortgage approval process to get your pre-approval.
- You have time to save up since you don’t need all of the money upfront.
- You may get a lower price for the property.
- You can customize your unit because everything’s being built from scratch.
- You can flip the property when you finally get the keys.
What are the cons of a pre-construction condo?
- You have to wait a long time. If you’re looking to move in on a specific date, you’re in for a rude awakening because there are many delays in this space.
- There could be issues with the builder. You’re hoping that the developer gets enough funding to launch the project and that they do everything on time.
- You don’t always get what you paid for. You could have many issues with the unit.
- There will be frustrating delays. The project is unlikely to finish on schedule or anywhere near the projected closing date.
- The project may not even start (this is a real possibility). The actual construction may just never begin.
I can’t write about pre-constructions without mentioning how stressful it has been due to the delays. You think that your unit will be ready and then a month prior to the closing date you get a letter informing you that there’s a six-month delay. I was fortunate enough to live at home during this time but I know that many others don’t have this luxury. If I didn’t have a place to stay, I would’ve been in a tricky situation.
Then to make matters worse…
I had two major issues with two different condo projects:
- One development had a fire which delayed the entire project by at least a year. The good news was that I had another year to save up. The bad news was that I had to wait another year to get the keys.
- The second developer went bankrupt. I was watching the news and found out that a major real estate developer was going bankrupt. I looked at the text to find out that it was the developer in charge of my building. Luckily, another developer took over and I eventually got the keys (the process took about 5 years in total).
Do these pre-construction developments exist today?
There will always be projects going up. You don’t have to look far to find an office near you selling condos based off blueprints.
The issue now is that prices are adjusted to match future expected market prices. There aren’t many bargains in Toronto. I still get daily emails about new prices. I’ve gone into a few open houses and couldn’t believe how astronomical the prices were.
Fortunately, this is still one way to get into real estate in a smaller city. I would take the time to sign up for a few mailing lists and to visit as many offices as you can if you’re serious about making a pre-construction condo investment.
How’s the real estate market today in Canada?
As you know, real estate prices are through the roof in Canada. This one tweet went viral recently about Canadian real estate…
It’s almost a fantasy to own a property in a major Canadian city. Many young people are frustrated and rightfully so. I have friends who are making fantastic money in their dream jobs and yet they can’t afford to make a downpayment on a home.
Here are some shocking statistics about homeownership new numbers from Mortgage Professionals Canada’s latest State of the Housing Market Report for the nation.
“Strong house price growth has led to a substantial deterioration in affordability, even despite strong income growth last year.”
“Average house prices in Ontario are 22.5 times the average disposable income .”
“Toronto and Vancouver saw home prices increase by 20.1% and 12.7%, respectively, in 2021, as inventory in those cities remained low.”
“Growth in detached homes was strongest as people moved out of apartments in major cities, boosting demand for larger units in smaller communities.”
Long story short: real estate is ridiculously expensive these days.
You can find many articles about the skyrocketing prices of Canadian real estate. It’s no secret that real estate has become basically unaffordable for the average Canadian.
This means a few things to anyone looking to get into the real estate market:
- You may have to wait longer to buy a place.
- You may want to consider renting over owning.
- You may not be able to buy property in your dream location.
- You may have to increase your income.
- You likely will get outbid when you do try to purchase a home.
I want to help you figure out how to get into the real estate market.
How can you start in real estate right now?
Many young folks are discouraged about the idea of buying a property these days because it seems to be out of reach.
Honestly, it’s worth having a debate if homeownership is even the right move, but that’s a different conversation for another day.
You shouldn’t give up just because real estate prices are high though. There are still ways to get into the real estate market.
How can you start in real estate today?
Consider renting/saving for a bit longer.
You may have to wait a little longer than expected to get your first property. I suggest that you use this time to save up and work on bringing in more money, fixing up your credit score, and getting your income situation settled.
The harsh reality is that you won’t be able to buy real estate in most major markets right out of college. You’re going to have to wait many many years to be able to afford this purchase. You may have to work for a decade.
“Between rising costs and the competitiveness of the market, Canadians may now be taking a step back and setting aside more time to plan and save before making the jump into home ownership.”
I know that you want to get into the market immediately, but you’re going to have to wait. The good news is that renting isn’t as bad as you may think.
Professor Murtaza Haider was quoted in this CBC story about expensive Canadian real estate:
“When you’re young, I would say that the better option is to rent until such time that you know that you are here for five to 10 years, and that’s where you invest in ownership.”
You don’t have to be ashamed if you need to rent for longer. Many young folks have discovered that renting is the better option because it provides them with flexibility and it comes with fewer expenses (you don’t have to fix the washing machine when it beaks).
Look into emerging real estate markets.
If you want to get started with real estate investing, you’re going to want to consider finding an emerging market to buy into.
With working from home becoming more common these days, you can try to move to a smaller town to get your foot in the door as a homeowner and real estate investor. While traditionally you may have wanted to be closer to a big city, the shift towards work-from-home has made it more common to buy a place out of the way.
How do you find emerging markets?
- Trends. You can tell when a new town is becoming more popular. You’ll start to hear more about it.
- Road trips. I’ve discovered fun small towns by going on random road trips through Ontario.
- Personal preferences. As you get older your lifestyle changes. I’ve seen friends move away to smaller towns that are known for the trails and come with more affordable real estate options.
The goal is to find an emerging market and then make the leap. Once you build some equity, you can look at coming closer to the city.
Get daily emails from your realtor.
I gave my agent the criteria that I have for a property and they send me daily updates of listings that are going up. I purchased a condo in 2016 because it was a great deal that came up and I was ready to act quickly.
Is this a lot of work? Yes. You’ll be going through emails every morning and constantly searching through listings. There’s no way around this though. Your search will take much longer to find that first property.
Consider creative options for real estate.
Real estate may be expensive, but it’s not impossible to get your foot in the door if you’re willing to be a little creative.
There are some creative options, such as:
- Purchase a home with a rental unit. If you can rent out your basement or a portion of the place, this would help you with the mortgage costs and other expenses.
- Consider putting a piece of your space on Airbnb. You can list a portion of your place on Airbnb (that extra bedroom or your basement). This will make things easier when it comes to your monthly expenses.
If you can’t afford the mortgage payments and all of the other expenses, you’re going to want to find some help.
Please do your research before trying any of these methods out. Real estate comes with many risks.
Some bonus tips to consider about real estate.
As I finished writing this, I realized that I missed many key points about getting started in real estate investing in this market.
Here are some bonus tips if you’re looking to buy real estate:
- Don’t fall in love with a home. With the market being so hot, it’s more important than ever to not fall in love with any home. I’ve heard of stories of places going way over asking with hundreds of offers coming in.
- Accept that you may have to buy a fixer-upper. Find a place that you have to fix up. It goes without saying that you have to put some work in on the unit.
- Keep on saving. Make saving money a priority and buckle down. Homeownership is more expensive than you could even imagine.
- Don’t get too desperate. Buying a home is a long-term commitment. You don’t want to get desperate and buy a place that you don’t care about just because you felt pressured to invest in real estate.
I had to bring up the point about not getting too desperate when looking to buy real estate because I’m seeing real estate horrors stories. I was reading about how many people are foregoing the home inspection and making unconditional offers. Please don’t do this. You don’t want to be stuck and find out that you need $30,000 worth of renovations on top of everything else.
Don’t forget about your credit score…
As you look for your dream home and stress about real estate, it’s easy to overlook your credit score and the role of credit in even getting approved for your first home mortgage.
What’s the deal with your credit and home mortgage?
A poor credit score will cost you money and hurt your chances of getting approved for a home mortgage. Nobody will want to loan you money for that home purchase because they won’t trust you with hundreds of thousands of dollars. You’re going to struggle to get a mortgage.
A strong credit score can save you thousands of dollars. It will help you save money since you’ll get offered lower interest rates when you apply for a home mortgage or any sort of loan in the future.
For everything (and more) that you could possibly want to know about your credit, you need to grab a copy of Completely Conquer Credit, my premium guide which is now selling for FREE. I don’t want you to spend any more money. Build your credit so that you get approved for that mortgage.
There’s just one last thing that we should address about the current real estate market…
Do you have to get into the real estate market?
Absolutely not. With rising inflation and home prices out of control, it’s important to remember that there are other ways to invest your money and build wealth.
Real estate also comes with many expenses, such as:
- Mortgage payments. With interest rates rising, your mortgage payment could be much higher.
- Taxes. You have to pay a land transfer tax and then you get hit with property taxes. The taxes never stop as a homeowner.
- Increased consumption. You’re going to want to furnish every room and you’re going to be spending more money constantly.
- Maintenance. Have you seen the price of a lawnmower? Do you know how much time it takes to do basic work around the house? You’re going to have to spend time and money on maintaining your place.
- Repairs. Everything that breaks is on you as a homeowner. You can’t call your landlord to fix your furnace.
The point is that you don’t have to feel guilty if you can’t afford a home right now. There’s no rush. You can invest in yourself, get into the stock market, create that side hustle, dabble in cryptocurrency and find other ways to grow your net worth.
The real estate market has changed, but that doesn’t mean that it’s impossible to give it a shot. You may not be able to land a home in your dream destination, but it’s still worth trying to see what options exist for you.