Whether you are increasing your family size or desiring to flee the city, there are many reasons why households typically uproot their households. But this also leads to another interesting question: What should you do with your current home?

For some, the answer is simple: sell it and move on. For others, households might want to use it as a rental property. In any case, it is essential to mull over current economic and market conditions.

A chorus of financial experts anticipates mortgage rates easing as the year progresses. With the annual rate of inflation easing toward the Bank of Canada’s (BoC) two percent target, investors expect the institution to cut interest rates soon. While the monetary authorities are engaged in a balancing act, many economists purport that policymakers do not want to keep interest rates higher than they need to so they can avert an economic downturn.

This is good news for buyers and sellers, especially for households that fall into the move-up buyer category. Although the average fixed-rate five-year mortgage hovers around six percent, many expect it to slow to five percent by the year’s end, which could encourage homeowners to make that leap and place their residential properties on the open market. This would, in theory, add more supply to housing inventories and possibly limit price growth.

But while first-time homeowners consider cashing in on their equity, taking advantage of lower interest rates, and moving into a bigger house, they might also consider using their first home as a rental property.

Let’s take a look at the pros and cons of keeping your first home as a rental property.

The Pros of Keeping Your First Home as a Rental Property

Here are the three advantages of keeping your first home as a rental property:

First Step Toward Real Estate Investing

Let’s be honest: Housing is a hot commodity these days. Despite the country’s vast size, there are not enough homes to accommodate Canada’s growing population, creating an enormous supply-and-demand imbalance from coast to coast. As a result, there is a tremendous opportunity for real estate investing. Since you have the luxury of already owning a home, this could be your opportunity to rent the house or condo while you buy your second home. This is an impeccable strategy for building wealth.

Passive Income

Yes, renting out your first home involves some work, and it will require time and effort, be it home repairs or property tax payments. However, for the most part, this is a passive income-generation tactic to bolster your monthly surplus. As alluded to in the first point, this is one of the best ways to build wealth.

Taxes

Are you looking to reduce your tax bill? Well, using your residential property as a rental unit can help you decrease the taxes you owe. Believe it or not, there is a treasure trove of certain expenses that you can deduct:

• Mortgage interest
• Insurance
• Utility bills
• Maintenance and upgrades
• Property management

In addition, should your expenses surpass your rental income, you could deduct these losses from any other income sources, meaning you can trim your tax bill.

At a time when governments everywhere are exploring tools to boost rental supply, this could be an opportune time to join the landlord business.

The Cons of Keeping Your First Home as a Rental Property

Here are three disadvantages of keeping your first home as a rental property:

Property Management Challenges

You might have heard the horror stories of being a landlord. Tenants are not paying the rent, are constantly late, and are destroying the unit. Unfortunately, this requires additional investments, from immense legal fees to costly repairs, that could affect your cash flow.

Missing Out on Cash Injection

The average home in Canada sells for close to $700,000, according to the Canada Real Estate Association (CREA). Of course, the selling price is much higher in places like Toronto. The point is that you could miss out on immediate profits should you rent out your first home rather than erect a for-sale sign. As the world has experienced in the last few years, many things can change overnight. So, potentially waiting to cash out could risk leaving money on the table.

What About the Future?

Should you decide that being a landlord and maintaining your new home are incompatible with your lifestyle, listing your first property on the open market could be challenging. This could be due to various reasons, such as renters damaging the property or the economic climate changing.

Moving Up in Today’s Housing Market

Whatever you decide to do with your first home, moving up is a significant milestone for you and your family. Therefore, you want to do what suits the household and your wallet. Is utilizing your first home as a rental property the correct decision? It is a matter of doing your research, consulting with Barnett Real Estate agent, speaking with a financial advisor, and understanding the market.

May 2024– GTA Housing Market News

Here is our quick market update for the Toronto Real Estate Board and Milton area.

By: Maggie Barnett

Milton Real Estate Market

The average price in Milton $1,046,179

Burlington Real Estate Market

The average price in Burlington $1,158,109

Oakville Real Estate Market

The average price in Oakville $1,591,978

 

Have questions about the market? Contact us today to learn more!

Previous Reports on GTA Housing Market News

April    March   February January December 

April– GTA Housing Market News

Here is our quick market update for the Toronto Real Estate Board and Milton area.

By: Jeannie Oropesa

Milton Real Estate Market

The average price in Milton $1,095,865

Burlington Real Estate Market

The average price in Burlington $1,114,352

Oakville Real Estate Market

The average price in Oakville $1,587,333

 

Have questions about the market? Contact us today to learn more!

Previous Reports on GTA Housing Market News

  March   February January December November  

Crispy air fryer chickpeas are the tastiest and crunchiest snack you will find. Using the air fryer cuts the cook time down to 15 minutes, and they are so much crispier than in the oven! Vegan and gluten-free, these crispy roasted chickpeas are an awesome healthier snack.

It can be a humbling experience for first-time homebuyers in today’s Canadian real estate market. Whether putting together sizeable down payments or navigating the challenging mortgage market, first-time homebuyers have many hurdles to overcome.

That said, despite what could be a daunting endeavour for many households, it is also an exciting time because you are making a decision that will impact the rest of your life. It might sound like a trope these days, but acquiring a single-family home, condo, or townhome is the most significant purchasing decision you will ever make. As a result, making the right decisions and doing your due diligence is imperative to ensure you are confident, prepared, and knowledgeable in this journey.

So, what should you know about the Canadian housing market as a first-time homebuyer?

Understanding the Real Estate Market as a First-Time Home Buyer

Here are seven aspects of the real estate market every first-time homebuyer needs to know:

Aim for What You Can Afford

Financial preparation is a critical first step in the homebuying process. In the early days of the pandemic, many households threw caution to the wind amid a climate of historically low rates.

Today, with mortgage rates averaging six percent and inflation still affecting household budgets, it is vital to manufacture a realistic homebuying budget and stay within your means no matter how large a mortgage you might be offered. To achieve this, you will have to crunch the numbers for everything: income, savings, and debts.

As a new buyer, you do not want to decimate your budget. When purchasing a residential property, you should consider other expenses than your mortgage. These include property taxes, homeowners’ insurance, and property maintenance and repair costs.

Mortgage Pre-Approval

As a first-time buyer, getting pre-approved for a mortgage is a prudent way to know how much lenders will allow you to borrow. However, even if you qualify for more than expected, ensure you can still afford the monthly payments. Remember that most properties require a minimum down payment of at least five percent. Of course, the bigger your downpayment, the less your overall debt will be.

Knowing Various Mortgages

Industry experts purport that understanding the different types of mortgages available is crucial to understanding the terms and conditions. This can also help you decide whether to choose a fixed- or variable-rate mortgage.

Fixed-rate mortgages are those where the interest rate remains the same throughout the term of your mortgage. A variable-rate mortgage is one where the interest changes. Mortgages can also have different term lengths ranging from six months to ten years. A longer mortgage term can help you lower your monthly payments, but shorter terms can score you a better interest rate.

As a first-time buyer, it is natural for you to want the best: the property size, location, or features and amenities. But it is best to be realistic and practical. It is not always possible to get what one wants every time. You may have to be flexible and compromise on certain aspects of your first home. This is especially true for people who are working on a tight budget. Hence, don’t aim too high or too low. Just be realistic and find a property that meets your most essential criteria and aligns with your current lifestyle.

Select Your Home

What type of home do you desire? Indeed, there are various categories of residential properties:

• Single-family homes
• Semi-detached houses
• Townhomes
• Condominiums

Different property types have different benefits and challenges.

For example, condos usually have many amenities but high monthly condo fees and special assessments. Detached homes offer more privacy but may be more expensive to buy and maintain.

Therefore, determining what type of home you want based on your budget, lifestyle, and long-term goals might be much more complex than you would imagine.

Research, Research, Research

Since this is your first time buying a home, you should research the national, provincial, or local real estate market comprehensively. This would typically consist of identifying the few locations that appeal to you the most and studying the property values and market trends in those areas.

You can understand pricing in those places by learning about local market conditions.

Find a Good Real Estate Agent

A real estate agent can be a lifesaver in many ways. Let’s be honest: as a new buyer, you cannot understand the dynamics of the real estate market as efficiently as a real estate agent would. With the Barnett Real Estate Team we believe that finding your ideal home should be an enjoyable experience. That’s why we focus on taking the stress out of your purchase. With us, no detail is overlooked. Our in-depth local knowledge and perfected buying process make your purchase seamless, successful, and fun! If we work together, you can truly relax—and focus on choosing a home that suits you perfectly.

The Home Inspection

Remember when it was reported that homebuyers were skipping home inspections during the pandemic-era real estate market? Crazy times! Now that conditions have stabilized, it is imperative to follow through on an industry custom: Getting a home inspection.

Sure, many novice homebuyers may not realize the importance of this step because they have never purchased a property before. However, inspecting a property you are considering buying can help identify potential problems. It might be tempting to skip this step, but do not make this mistake. The amount you spend today to inspect the property may save you a lot more in the long run.

March 2024 – GTA Housing Market News

Here is our quick market update for the Toronto Real Estate Board and Milton area.

By: Katherine Barnett

Milton Real Estate Market

The average price in Milton $1,061,031

Burlington Real Estate Market

The average price in Burlington $1,119,979

Oakville Real Estate Market

The average price in Oakville $1,486,047

 

Have questions about the market? Contact us today to learn more!

Previous Reports on GTA Housing Market News

  February January December November  October

Maximizing your home’s value doesn’t always mean diving into big, costly renovations that eat up a lot of your time, effort, and budget. Often, it’s the smaller, easy-to-manage updates that can make a difference, boosting your home’s appeal and value. These cost-effective tweaks can transform your living space, making it more attractive to potential buyers or simply more enjoyable for you. A fresh coat of paint or new fixtures can go a long way. In this blog, we’ll explore how making just a few smart changes can significantly enhance your home’s value without the need for major upheaval.

Maximizing Your Home’s Value with Paint

Refreshing your walls with a new coat of paint can revitalize any room, influencing its perceived size and ambiance depending on the colours you choose. For interior spaces, neutral shades like beige, grey, and off-white can make rooms appear more expansive and brighter, appealing to a wider range of buyers. In contrast, for a modern twist, consider accent walls in bold colours to introduce character and depth to the space. Select high-quality, durable paint, particularly for areas that experience high traffic.

Closet Organization

Many homebuyers place a high value on storage space. A cluttered or poorly organized closet can be a turn-off, suggesting that the home doesn’t have enough room for their belongings. By installing closet organizers or inserts, you can significantly enhance how a closet functions. These additions can divide a chaotic space into well-ordered sections, making it easy to store and find items. This can include extra shelves for folded clothes, drawers for smaller items, or additional rods for hanging clothes, making even small closets highly efficient. Closet organization solutions come in various materials and styles, allowing you to choose options that complement your home’s aesthetic. This attention to detail doesn’t just increase the closet’s functionality; it also enhances its visual appeal, making your home more attractive to potential buyers.

Lighting Enhancements

Lighting sets the mood and can even make spaces appear larger and more inviting. Switching out old light fixtures for sleek, modern options is an easy update that packs a big punch in terms of a home’s look and feel. Plus, opting for energy-efficient options like LED lighting not only bathes your home in a flattering light but also cuts down on energy bills, which is a big plus for eco-conscious buyers. Updating from dated chandeliers to chic pendant lights or refreshing your recessed lighting to something more contemporary can give any room an instant lift, adding a touch of luxury and warmth that makes your home stand out.

Think about strategically adding lights to illuminate dark corners or show off your home’s unique architectural details. For instance, under-cabinet lighting in the kitchen can make the space feel warmer and more inviting, and it also boosts functionality. Outdoor lighting, too, plays a dual role: it welcomes guests with a cozy glow and ramps up security. When picking out light fixtures and deciding where to place them, aim for harmony with your home’s design theme. This ensures a unified aesthetic that really brings out the beauty of your home’s standout features.

Switches and Hardware

Often, it’s the smallest details that make the biggest difference. Replacing outdated light switches, outlet covers, and hardware like door handles and cabinet knobs can have a surprising impact on a home’s overall look and feel. These elements might seem insignificant on their own, but together, they contribute to a polished and cohesive aesthetic. Modern light switches, for example, not only improve functionality with features like dimming and smart home compatibility but also add a touch of sophistication. Similarly, new hardware in a consistent style and finish can unify the design throughout the home, elevating the interior’s elegance.

Smart Home Features

Smart thermostats, doorbells, and locks are becoming increasingly popular and can add an element of modernity and convenience to your home. These features are attractive to homebuyers who value energy efficiency and home security. They’re relatively easy to install and can make your home more appealing to tech-savvy buyers. As technology continues to advance, homes equipped with smart features are seen as better investments. They’re considered “future-proof,” reducing the need for costly upgrades down the line.

Maximizing your home’s value doesn’t always require large-scale renovations. Small updates can significantly enhance the appeal and functionality of your home and increase its attractiveness to potential buyers. By focusing on these cost-effective renovations, you can achieve a significant return on investment, making your property stand out in the competitive real estate market.

Unlock your home’s true potential and maximize your home’s selling price with the Barnett Real Estate Team. Our seasoned professionals use tailored strategies and local market expertise to connect your property with the ideal buyer. Reach out to us today.

February 2024 – GTA Housing Market News

Here is our quick market update for the Toronto Real Estate Board and Milton area.

By: Maggie Barnett

Milton Real Estate Market

The average price in Milton $1,106,624

Burlington Real Estate Market

The average price in Burlington $1,117,004

Oakville Real Estate Market

The average price in Oakville $1,575,436

 

Have questions about the market? Contact us today to learn more!

Previous Reports on GTA Housing Market News

January December November  October September 

Paying property taxes is an essential responsibility for homeowners, as these funds support local government services and infrastructure. When it comes to managing property taxes, homeowners often face the decision of whether to pay them directly to the tax authority or through their mortgage lender. This choice can have significant implications for budgeting, convenience, and financial planning. Let’s examine whether this approach aligns with your financial goals and preferences, or if other options may be more suitable for your situation.

The Advantages of Paying Property Taxes Through Your Mortgage

Paying property taxes through your mortgage offers several advantages that can simplify your financial planning and homeownership experience. Here are some of the key benefits:

Simplified Budgeting – Combining your property taxes with your monthly mortgage payment simplifies your financial responsibilities. You make a single payment to your mortgage lender, who then disburses the funds to cover your mortgage principal, interest, and property taxes. Since your property taxes are spread out over the year, you can anticipate and budget for consistent monthly payments, making it easier to manage your finances and avoid unexpected lump-sum tax bills.

Elimination of Lump Sum Payments – Property taxes are typically assessed annually or semi-annually, resulting in substantial lump-sum payments for homeowners. By paying through your mortgage, you eliminate the need to come up with a large amount of money all at once. Without the burden of a significant tax bill looming, you can better allocate your resources to other financial priorities, such as home maintenance, savings, or investments.

Lower Risk of Tax Delinquency – Paying property taxes through your mortgage ensures that your taxes are paid on time. Mortgage lenders are responsible for making timely tax payments, reducing the risk of tax delinquency and potential penalties. With tax payments integrated into your mortgage, you can have peace of mind knowing that your property remains in good standing with local tax authorities, preventing any potential tax liens or legal complications.

The Drawbacks of Paying Property Taxes Through Your Mortgage

While paying property taxes through your mortgage offers convenience, it also comes with some drawbacks that you should consider before making this choice:

Higher Monthly Payments – When property taxes are added to your mortgage payment, your monthly housing costs will increase. This can strain your monthly budget, particularly if you’re on a tight financial plan. Lenders often require homeowners to maintain an escrow cushion, which is an extra amount added to your monthly payment to ensure they have enough funds to cover property taxes and insurance. This cushion can further increase your monthly expenses.

Loss of Control over Tax Payments – When property taxes are paid through your mortgage, you relinquish direct control over tax payments. Your mortgage lender handles the disbursement of tax funds, which means you may not know when and how they pay your property taxes. If there are discrepancies or issues with your property tax assessment, you may have limited ability to address them directly with the tax authority since your lender manages the payments on your behalf.

Potential Escrow Shortages – Property tax amounts can change from year to year due to factors such as reassessment or changes in local tax rates. Your lender may adjust your monthly payments to account for these fluctuations, potentially resulting in higher payments and escrow shortages. Escrow shortages can lead to unexpected increases in your monthly mortgage payments. These fluctuations can cause financial stress if you’re unprepared for the higher costs.

Alternatives to Paying Property Taxes Through Your Mortgage

Paying property taxes directly through your mortgage is not the only option for homeowners. Depending on your financial preferences and goals, there are alternative methods for managing property tax payments:

Direct Payments – With this approach, you pay property taxes directly to the tax authority when the bills are due. This method offers complete control over when and how you make your tax payments. You can take advantage of early payment discounts or choose to set aside funds in advance, potentially earning interest on the money before it’s due.

Property Tax Savings Accounts – Open a separate savings account specifically for property taxes. Each month, set aside a portion of your income into this account to cover your annual tax bill. This method allows you to maintain control over your tax payments while earmarking funds exclusively for this purpose. It provides transparency and separation of property tax funds from your regular expenses.

Third-Party Escrow Services – Some homeowners hire third-party escrow services to manage their property tax payments. These companies take responsibility for collecting funds and ensuring timely payments to the tax authority. Escrow services can provide peace of mind by handling all aspects of tax payment management, including monitoring changes in tax assessments and handling any discrepancies with tax authorities.

To make the best choice for your circumstances, consider your financial stability, budgeting preferences, mortgage lender requirements, local property tax rates, and personal financial objectives. Evaluating these factors will help you determine whether paying property taxes through your mortgage or opting for an alternative method is the right path to meet your financial goals while ensuring your property taxes are managed effectively and on time.