Home Buying Tip #1

I am cheap. Cheaper than a five dollar hooker on toonie tuesdays. I don't like to spend money if I do not have to. When I went to buy my house, I had the "option" of getting a home inspection performed. It was going to cost me about $400 plus tax. $400 is a lot of money when you've only been out of school for a few months. My "frugality" forced me to reconsider this extra cost.

I had seen the house. I knew that there were some issues with the home. Hence, why the house was in my price range. I figured that a home inspection would just tell me some things I already knew.

One of the things that I already knew was the fact that the floor had sloped a little bit. As a result, I was concerned that there was something wrong with the structure of the building. I wanted to ensure that the house would not fall down. I decided that it would be best to perform the home inpection.

The home inspector was recommended by my real estate agent. I figured that my real estate agent should know someone that is either cheap, or really good. Anyways, the guy showed up one afternoon and we went through the house. The home inspector went up in the attic, up on the roof, in and out of the house, and down through the basement. I felt as if he was concerned that I was making a good investment. As we were going through the home, he ensured that he let me know what he was looking for and if he had found any problems in my home. He wanted me to ask questions if I had any.

With the exception of the stuff I had expected, the home inspector was able to identify that the furnace was nearing the end of its life. The furnace was short-cycling, but I had no idea what short-cycling even means. Short-cycling indicates that the furnace would turn on and off in a relatively quick period of time. This indicates that the safety device in the furnace is forcing the furnace off because of something that it does not like, like a dirty filter or something similar. The furnace goes back on because the temperature in the house needs to increase slightly. The On and Off nature of the furnace indicates that it is not as effective as before. It needs to be replaced.

Now, I should take a step back and mention that a tentative deal had been reached at this point with the seller. We had negotiated a price that we were both comfortable with, but it was subject to some conditions. One of the conditions happened to be the home inspection. Now, instead of the deal falling apart because of some extra costs associated with the furnace, we had an opportunity to re-negotiate the price again.

In the home inspection, there were a lot of items that were identified. These included some light fixtures that need to be replaced, some painting to be done, etc. There were other items that were identified that were larger, but were obvious from my own inspection. I had tried to gain a credit for some of these things, and had tried to gain a credit for the furnace. Obviously, since the other items were "known", I was not able to get a credit. I did, however, get a credit for the furnace.

In summary, the home inspection saved me $2000 on the purchase price. With the $400 paid out, the inspection more than paid for itself. In addition, I get the peace of mind of having the home inspection performed. I know that I shouldn't have too many surprises with the home.

Therefore, I'd recommend that you get a home inspection every time you purchase a home. In my situation, even if the furnace was found to be in good working order, I believe I would be able to negotiate a better price. The report looks intimidating and could be used as good leverage during negotiations. You should be able to negotiate at least the cost of the home inspection given that the report is very detailed.

Home Inspection Pictures

Here are some pictures from my recent home inspection. The pictures contain some captions that attempt to describe what the home inspector was looking for. Obviously, I could not remember everything that he told me, but I hope to describe the process a little bit. For those looking for a home, this information could be helpful in terms of what to expect with a home inspection, especially with an older home.

In the future, I will post more details from the actually report that I had received. I will try to paraphrase some things in order to abbreviate the report. I will do this because there are a lot of minor repairs that will be tedious to repeat. I will also try to detail some of the things that the home inspector was looking for in general terms. He did not find some items in my home, but I was sure to ask a lot of questions regarding what he was looking for and that information may be found useful by someone looking to get a home inspection done.

Room sizes

I am going to try to update this blog as much as I can. I am going to include as much information as possible in order to allow people to develop an opinion. I would like for people to share that opinion through polls and comments to help me decide which ideas are best for my new home.

Currently, the lawyer is working out the final details of the agreement. The house is under a lease and the tenants are going to be living there until the end of August. The lawyer will have to credit my account for rent and other miscellaneous adjustments. I'm getting anxious as the final closing date is February 11, 2008. It is the day I officially own my 2nd home.

The home is a semi-detached which mean that I only own half of the building. It is 2 storeys tall, and there is a basement that is semi-finished.

In addition to that information, I have some room sizes to help give you, the reader, a better idea of how my house is laid out. Until I get some new pictures, this will be the best that I can offer in terms of a visualization.

On the main level:

Living room - 12.00 x 9.9
Dining room - 14.50 x 10.75
Kitchen - 11.40 x 10.6
Den/bedroom/home office - 10 x 9.6

On the 2nd level:

Master Bedroom - 14.25 x 11.9
Bedroom 2 - 12.10 x 8.6
Bedroom 3 - 11.4 x 8.6
Bathroom - ???

F.A.Q.'s

I decided today would be a great opportunity for me to answer some of the more common questions that I receive about my recent ventures in real estate. It will give some background on my thoughts and goals in this whole process. Although some of the renovations will not occur until late summer, I want to be able to plan as much as possible to help reduce costly mistakes. I will be posting to the blog on a semi-regular basis as a result.

When are you moving in?

I am planning to move into the house in September 2008. Currently, the house is being rented by students. The students are under lease until the end of August. Their rent payment will be enough to cover my mortgage for the period that I do not live there. This will give me an opportunity to try to save up some money to help towards renovations.

How can you afford two houses?

I can't. I would never be able to pay the full cost of the two mortgages on my own. The key is to have income coming in. I have decided to rent out one property entirely, and the other property entirely until I want to take over. After I take over, I plan to rent out a room or two to help cover some of the expenses. Hopefully, by doing this, I will be able to get a little more money ahead to help with additional renovations.

When I bought the first house, I had used some of my personal savings for down payment. In addition, I had performed some legal maneuvering in order to obtain this home. I'm not going to get into many details, but tell you that I now own that house.

As for the second house, I purchased this home using money that I had saved up over the years using an RRSP. When I was 18, I put $3500 into an RRSP. Every subsequent month, I had put $50 per month into the RRSP. Honestly, if you have never done it, I would recommend making an RRSP contribution this year. There are tax benefits now and you will be saving for a home in the future. There are some serious benefits in doing this. The $50 a month is nothing. I do not even notice it coming out of my bank account each month, but it has paved the way for me to own a house.

In addtion to the RRSP advice, I want to give another little bit of wisdom. Although it seems like that it sounds very profitable and the opportunity to establish some equity sounds desirable, it is very important to consider many factors when purchasing a home. Most people will only ever buy a home once or twice in their lifetime. It is truly one of the most important decisions that you can make. Therefore, it is important to do your homework. There is not much point in paying a mortgage if you decide that you are not settled into a career or city. The transaction costs associated with homes is fairly significant and the concept of living in a home for one or two years is probably going to result in you losing thousands of dollars. You have to be sure you want the home.

Where did you find the second house?

I'm a bit of a real estate junkie. I frequently visit mls.ca to help keep an eye on the properties in the vicinity of the first home that I bought. I want to see if places are selling, what they are being listed at, and the details of those homes that are comparables to the home that I own.

Recently, I've been using mls.ca to look at homes in the area in which I wanted to live. I wanted to do some research on the area. I wanted to make sure that the place I bought wasn't going to cost me any more then it had to. I had stumbled a couple of properties in the past that I thought would be pretty good, so I had an old friend from high school send me some additional information. He's a real estate agent and he gives me some extra info on properties if I ask him. Unfortunately, the properties I thought might have some potential were listed on Bell Street. Bell Street is a dump and the houses were appropriately valued.

One day, I had came across another property. I asked my real estate agent for some additional information and he told me that it was on Arlington Street. Not knowing where it was at first, I google-mapped it and decided that this was a prime location. The price seemed right, so I made an appointment to go and see it. The rest is history and will explain it at another time...

Help wanted

In addition to increasing my HGTV viewing time from 0 to some, I will be using this blog in an attempt to get some input on what I should do to upgrade my home. I will try to get some pictures of the current state of the house, and will try to give links to upgrades that have already been completed by a contractor in order to give a visualization.

Keep in mind, I do not take over the house until the current tenants are prepared to move out. The end of their lease is in August of 2008, and I will likely be taking over sometime in September. In the meantime, I will be researching items that fit my budget and will be seeking some input along the way.

I have included a poll feature on the website to help to create a consensus of opinions. Ultimately, I will make the final decisions and will post the results on the blog. My goal is to perform most of the work myself in an attempt to save some money and to become a little more "handy".

I will also be looking for 2 roommates in September. I haven't thought too much about the rent price, but I will assume it will be in the neighborhood of $525 with utilities included. This property is located at the corner of Kent and Arlington in downtown Ottawa. It is close to the Queensway and only two blocks away from Elgin Street.

Please feel free to leave comments or ask questions. They may be questions that can serve as an interesting blog post for others to read about.

My new "home"

New Year, New Job, New Rad, New Phone, New House???

This year has been off to a hectic start. I am settling into my new job nicely, but it's some of the other things in my life that makes me feel like there should be 25 hours in a day.

The week started like a hobo in the morning, poorly. I was on my way to work when the engine of my car began to overheat like a manatee in mating season. I blew my radiator and I was not happy. I knew I would have to fork out a decent amount of coin, and this would not help the negotiations I had been having about the purchase of a new home. This event, of course, followed the previous day where I had lost my cell phone after a delicious stop at one of my favourite fine dining establishments, Harvey's.

Between the new phone and a new rad, I had spent an annual salary of a Mexican resort worker. As I was in negotiations for a new home, my "buffer" cash was deteriorating and I was not sure I could continue to go through with it. After all, the voice of reason (Mom and Dad) were in Mexico slurping back on some strawberry daiquiries.

At first, I went to see the house and I was very intrigued. The house is an older home that was clearly in need of some repairs. The students that are living there had a month's rent worth of beer bottle deposits, and a homemade bong here and there. The house certainly has the "ghetto" feel to it.

The nice thing about this home is that the house was priced accordingly. It was affordable to me. It looked profitable to me. The house is spacious and has the potential to be a really nice family home. With a little TLC, I could make this student house into something special.

I decided to jump again into the real estate pool. I decided to purchase this home. Currently, there are a bunch of students in there under lease until the end of August. For some potential buyers, this could be a big nuissance. For me, it's a chance to save up some money for some renovations when they do decide to move out.

When I saw the place, I had some issues with the house, but that was mitigated by the price and location. I was pretty sure that I had wanted this place, but there was a catch. There was another couple that wanted the place. A bidding war had begun....

My real estate agent told me to think hard about what I wanted to do. As a buyer, I could look for another place that would meet my goals. I decided to put my best foot forward, and I made an offer that I would hope that would beat the offer of the other couple. Unfortunately, the other couple had outbid me. They had made a conditional sale because they had went in at the listing price.

I had given up. I was not prepared to go excessively high on this home. If I am going to make it work, I had to be comfortable at coming in at a price low enough to make the repairs worthwhile. Fortunately for me, the other couple could not come up with the financing that was required. Apparently, the guy in the relationship had a couple of bankruptcies. I'm betting that she wasn't too happy.

I was back in the game! This time, my back was not against the wall. I decided to make a ridiculously low offer for the house. The offer wasn't accepted of course, but it paved the way for me to get this house for the price I wanted. I was in the driver's seat. I wasn't under the same pressure. I am now the proud owner of 75 Arlington Avenue.