Some real estate basics

Today, I thought I would share a few basics for the first-time buyer. If you are thinking about purchasing in the near future, here are a few tips that may help you out:

1. Get pre-approved for a mortgage - From an agents perspective, this is one of the first things that you should do. Agents want to know what you can afford. This will serve as a useful background in helping you narrow down your search. I usually like to sit with my clients after they've been to a bank to ensure that they can afford what the bank is offering. There are some lifestyles that may have to change because what the bank says you can afford and what you can afford based on your lifestyle can be two different things.

2. Understand the costs - I think the biggest surprise to people is the CMHC insurance. What is CMHC insurance? It's a premium levied on buyer's to help protect lenders when a down payment is less than 20%. Basically, it means that you may purchase houses at lower interest rates with smaller down payments than would otherwise be available for a loan that had a larger downpayment. The premium is based on the size of the down payment and amortization period of the loan. Therefore, you may wish to think twice about having a 30 or 35 year amortization period.

3. Learn about the market - This is where I think I try to help out my clients the most when I show houses. I think once they have an understanding of the areas in which they want to live, they can make an educated decision about what to buy and not an emotional one. Home buying is a big decision, so it can become very emotional very quickly. The more you know, the more rational your decisions are and the more likely that you've made a great decision.

Other topics
- Learn about different mortgage options. You may not want the best 5 year fixed rate.
- Home inspections - How you can use them to save you money
- Buying new vs. buying used - who are the good builders out there. Do you need an agent?
- The costs of an agent - each agent has a cost. What is the true cost to you?

If you know someone that is thinking of buying, please send them my way. I can go over many of these topics with them to ensure they make a sound business decision.

Book

For awhile now, I have been preaching to family and friends about the need to educate people about money, debt, and investing. It's something I think is fundamental about our lives, yet we do not teach enough about it in schools. I think it's a core reason for why you see people go into university and come out with a barely manageable debt. I think it's a reason for why the US had a real estate crisis. There are fundamental rules and principles that people can follow that they simply know nothing about. It's time to try to educate.

At first, I thought it would be best to try to help lobby school boards to institute some sort of course in school. I think this is the best approach to teach Canadians about wealth management, but there may not be enough tools, or training available to implement this idea. Sure, there are a ton of get rich quick books, and books that promote wealth through real estate, stocks, or small business development, but a lot of these books that I have read appeal to only the entrepreneurs in the world. I'm thinking of creating a book that teaches some basic fundamentals about budgeting, taxes, investment plans, and other goals. It's a guide to not going broke for dummies.

I have never written a book, nor have I been a stellar student in English class. I have not made millions of dollars, or owned my own business. I pay for $10 haircuts. I still eat Kraft Dinner on occasion, and I just got a new job working for someone else. I am just a normal guy who paid his way through university without going into debt, owns 3 rental properties, and has dealt with hundreds of businesses because I have my Chartered Accountant's designation. I know why businesses fail and succeed. I know why people fail and succeed in their financial lives. It's not complicated, but, like how to cook, some people have never learned about it.

Hence, my decision to try to write a book. I will likely take a few years to write it, probably never get it published, but I still want to write it. It's a creative exercise that I would not have had the opportunity to do while working in a public accounting practice. I'll let people know how it goes.

New Job!

For those that didn't know, I got a new job as a business consultant with the city of Ottawa. I have a week off next week before I start, and I will be using the time to catch up on a few household things. I'm really excited for the opportunity and I think it will give me some more free time on the evenings and weekends in order to do a little more in real estate.

I'm going to miss being an accountant in a public practice, but I just don't think I want to commit my every waking second in tax season to accounting. I'm thinking that I might do a few returns on the side next year, but generally, I will not be returning to a tax firm. I want to be in control of the amount of work that I do in any given year. It's a work-life balance issue, and I decided I wanted more of a life than to work all of the time.

Happy Mothers Day!