Help me buy my first house!

February 25, 2013 12:08 PM

My partner and I have saved a deposit of $50,000 to put down on a house. We're looking for a one bed flat around the Gastown area of Vancouver BC, which we may end up renting out while we move to the US for a couple of years for work, but I have no idea how to go about this.

We've been to the bank where they quoted us a loan for $600,000 which is at least $200,000 more than we think we could comfortably repay. So with that in mind, my next step is finding a place. What is the best way to go about this? I hate estate agents with a fiery passion but can't see how we could do this without one. I'd like some advice about what to look for, how much to pay for what, and periphery costs that don't come from a dodgy sales agent. Where could I find the kind of info I'd need to be an informed buyer?

Also, on the issue of renting the place out, we'd be looking for someone to manage that while we're away. But costs for management lead me to think we wouldn't even break even on the mortgage repayments were we to do this. Does anyone have any experience in this area - how did it go for you? Could you cover the cost of the mortgage with the rent? Were your managers trustworthy, or did you come home to major damage and squatters?

If I were in my home country, I'd know much more about this, but I have no idea about property law, duties and processes in Canada. If anyone could help me make these waters a little less murky I'd be very, very grateful!

posted by everydayanewday to shopping (9 answers total)

You really need a good agent to help you locally with this process.

Not ALL real estate agents are "dodgy", I know two or three in my area that I would trust with no hesitation. Check with co-workers, friends who have bought or sold real estate recently to get recommendations for an agent that has proven themselves to be hard working, knowledgeable, honest, and reliable. Really, you NEED an agent to navigate through this. And, a good agent, will be able to answer many of your other post-purchase questions and recommend other professionals.

Start networking....

and, why not wait until you return to make the purchase???
posted by HuronBob at 12:14 PM on February 25 [3 favorites]

Just wanted to second waiting to buy until you return.

Being an out of country landlord is really undesireable and it opens you up for all kinds of problems.

Also, the rumble I hear is that the Canadian market is due for a correction similar to what happened in the US in 2007, so...waiting won't hurt you.
posted by Ruthless Bunny at 12:18 PM on February 25 [2 favorites]

Your suspicion of real estate agents is well-founded. While there are some decent individuals, the incentive structure is designed to make them evil parasites on your best interests. Interview them, tell them you are on to them, make them justify themselves.

Also, line up an inspector in advance, and get a checklist of what to look for online to take with you.
posted by RandlePatrickMcMurphy at 12:22 PM on February 25 [1 favorite]

Where you'll be moving to in the U.S. would determine the viability of renting a place out while you're gone. If you're going to be in Seattle or Portland, for example, it's quite manageable to go home once every six months, or even more frequently, to check in on the place. Make sure you have a legal one-year lease agreement, check your tenants' references thoroughly, make sure you feel "right" about them, and get a two-month security deposit. That said, you had better make sure you know someone who can handle matters for you while you're gone, or be flexible enough to return should you need to in order to handle affairs with your home. Just because you sign a tenant to a one-year lease doesn't prevent them from leaving early and you holding the bag.
posted by zagyzebra at 12:27 PM on February 25 [1 favorite]

For renting it out: would you do it furnished or unfurnished?

From experience, Unique Accommodations does a ton of furnished rentals. I'd check out their offerings for comparable places to yours, and talk to them about the monthly fees. Figure out how much you could charge, and how much you'd pay UA to manage your property. Then you have to figure out your mortgage, insurance, taxes (higher because of rental income), and add in some more for other issues. Then figure out the difference. It's also important to assume that you won't have 100% occupancy rate, so you'll have to account for that in your math too. Or you could find a longer-term renter for more security, but the flip side is that you'll often make a bit less. Totally depends on the kind of property.
posted by barnone at 12:30 PM on February 25 [1 favorite]

Scenario: You're renting the place out, you and your partner are living, working, and paying rent in the US.

Your tenant's lease runs out and she moves. Nobody else moves in for 3, 6, 9 months. Can you afford to pay your rent and the mortgage and the property manager and maintenance and repairs?

And then what if one of you loses your job, becomes unable to work, or needs to not work for some period of time for purposes of reproduction or child-rearing?

My current situation involves squatters, a foreclosure that probably won't happen for another year or two because our bank is too incompetent to foreclose, and wear and tear on my marriage that I was too naive to realize I was signing up for when we bought a house in the first place.

The only way you make any money on rental property is if the current market rate is quite a bit higher than what you're paying for the house. Rent out a place you bought in 1984, with a year left on a 30-year note with payments that are downright adorable they're so small, and after they built that new office park 4 miles away? Boo-yah. Do you actually think you're going to be able to rent your place for 150%+ what you're paying for it? Your downstairs neighbor is renting theirs for half that.

You don't have to own a house to be an adult. If you and your partner are capable of saving $50K, then you are capable of saving $200K in a few more years. Reconsider purchasing at that point.
posted by Lyn Never at 12:46 PM on February 25 [5 favorites]

First of all, the seller pays the agents' fees so unless they agree to cut you a deal for not using one, you're better off having an agent. This is particularly the case if you're not local and unfamiliar with the process. I know lawyers who practice real estate law and they still hired an agent to buy.

Secondly, I think you'd be crazy in Vancouver's market to buy simply in order to rent it out. That is not a money-making proposition here the way it is in many cities: rents have not kept pace at all with purchase prices, so you may find it hard to cover your mortgage by renting, especially after you consider properly taxes, utilities, and a management fee. Waiting makes sense. There are also property transfer tax exemptions for purchases under a certain amount (I think it's $400k but you can check) that you won't benefit from unless the house is your principal residence. That's a lot of money to throw away.
posted by Pomo at 1:05 PM on February 25 [4 favorites]

Nthing to wait. Canada has a criteria to determine if you pay income tax. This is partially based on residency, property ownership and investments in Canada. I would check when you do your income taxes this year what impact owning a home in Canada will have on your obligation to pay Canadian income tax on your US income while you are there. (You would have to pay the regular US income tax on any income earned in the US, then that amount is applied as a credit on the higher Canadian tax, leaving you to pay the remainder to Canada. This would be in addition to your taxes on 'revenue' from the rental property.) If you do not meet the residency criteria and have no investment ties to Canada, you would likely pay zero Canadian tax and be able to save more while in the US.
posted by Yorrick at 3:24 PM on February 25 [2 favorites]

Read Garth Turner's blog before you make any decisions.
posted by stavrosthewonderchicken at 4:36 PM on February 26