Welcome to 2013, Home Buyers and Investors!

This may seem really geeky, but I really get a kick out of goal setting, so new year’s resolutions are a given for me. If buying a new Ontario home or investment property is on your radar this year, here are five resolutions for first-time home buyers and property investors, that you could consider adding to your list:

[spacer height=”5px” id=”3″]1. Set a “smart” – Canadian – goal

You’ve probably heard the term “smart” goals. What the letters of the acronym represent can change, but it’s usually something like: Specific, Measurable, Achievable, Realistic, and Time-bound. In the event you’re thinking of buying a property, or multiple properties, and you’re a newbie, this may be where you’re getting stuck. The solution? Learn, read, ask. Be willing to go to seminars, read books and articles, and don’t be afraid to ask questions. If you’re just starting out, you probably want to avoid books and seminars with titles like “Get Rich Quick and Easy with Real Estate”. First, there’s no such thing (unless by complete, and therefore uncontrollable, fluke), and second, if there are really funky strategies suggested by a book or seminar, I think you’ll regret skipping the fundamentals. Without laying the foundation, it will be really hard to create a sustainable plan. One Canadian real estate investor book I really like is Don R. Campbell’s Real Estate Investing in Canada, but there are a number of other good, credible, Canadian real estate authors worth checking out.  Why the emphasis on Canadian?  Multiple reasons.  Most importantly: our property markets here are very different from those in the U.S., and as well, the tax treatment of real estate income and property costs are not the same south of the border.  Stick to Canadian authors and you’ll get the right info.

2. Get into shape (credit-wise)

This one may be a little painful, but as they say, “no pain, no gain”.  This one is crucial. Check out the Financial Consumer Agency of Canada’s guide to understand how your credit is measured and what impacts it positively or negatively. I’m not saying you won’t get financing for a home with poor credit, because you probably still can.  But, to set yourself up for the best possible financial terms, rate, and conditions, you should focus on getting that Beacon Score and Credit Report to be as fantastic as they possibly can be.

3. Save, save, save

If you’re buying a new home in which you will be residing, you may be able to have a down payment as low as 5% toward the property.  However, you’ll also need money for closing costs, and, ideally, set aside some money for an emergency fund too.  Your down payment money can be tucked away in an RRSP, TFSA, or something similar (though make sure you understand the rules around the First-Time Buyer program – how long money needs to have been in the account, and what types of purchases it can be used for).   If a close family member is willing to gift you funds for all or some of your down payment, that can work too.

If you’re buying an investment property, focus on getting at least 20% saved.  If you own a property already, you may be able to take out some equity to use toward the purchase of another property, rather than needing to come up with the down payment in cash.   As well, please note that the 20% down payment figure is just a guideline: in certain cases, such as with alternative lenders, you may be able to get additional financing above the 80% mark. However, in that scenario, you need to be prepared to pay a bit more in fees and / or higher interest rate, so this needs to be incorporated into your overall budget for the property.

4. Get disciplined

In parallel with the above, you also need to select a team, and figure out your financing strategy. The team should include a good real estate agent, mortgage broker, property inspectors, financial advisors, and accountants.  These are people you would talk to, in order to make sure you are setting appropriate and achievable goals.  And similarly, pulling the numbers and documents together for a pre-approval (in the case of a first-time homebuyer) or a financing strategy (in the case of the real estate investor) is key as well. You’ll then be fully informed as to what your credit is like, what you need to specifically save based on your own personal situation, and where you should be looking to find properties that will suit your expectations and budget.

5. Take action!

Don’t spend the whole year thinking about it. Do it!

Here’s to an awesome 2013!

Photo credit: [c] Lonnie Bradley