I often find myself recounting the following story to my first time buyer clients. The house hunting virgin can have a lot of trepidation about the whole process of buying their first home. It seems like such a large purchase and questions such as; can we afford it? and what if this and what if that….. ? start to arise. Understandably of course, so here’s what I generally tell them the first time we’re out looking….
I’m very passionate about real estate and how empowering it is for people. I, at the young age of twenty-two experienced this first hand and I feel most don’t realise it until later on in life. My mother strived for thirty odd years to pay off the mortgage on her home and on inheriting it I had some decisions to make. I can recall the very moment as I sat on the couch with a good friend of mine, and decided I was going to hang onto it, fix it up and rent it. I had absolutely no idea of the process but was eager to learn, it was an exciting adventure indeed, one that was to change my entire direction in life. I lived and worked in Limerick city during the weeks and often I found myself driving back to Cork on evenings and at weekends to keep an eye on progress with the renovations. I had a few relatives who had rental properties so I was running things by them all the time. Once all the work was done and I had all the new furniture in, (Homes are rented with furniture in Ireland), I hired a property management company and we soon had it rented.
… and the first light bulb went off! A rent cheque popped into my bank account for the first month’s rent and continually did so every month after that for the term of the occupancy. I remember the big paradigm shift that occurred in my head. It was just such a different experience to earn income in this way. Yes I had to oversee the management company and yes I had to put in the efforts to have the home renovated but mostly It was a hands off experience.
Of course somewhere along the way I ended up in Toronto, (And depending on whether or not my client’s have the most terrific look of boredom on their faces I’ll choose to possibly delve into that story a little bit). I was eager to learn more about this real estate stuff. However, you don’t get very far without some resources in this game so I found myself with the option of refinancing the same home in Ireland!
…. and the second light bulb went off! So not only was there an income coming in to help with these monthly interest payments, but I also had the opportunity to extract equity from the home? Once again, my mindset took a left at the traffic lights.
In telling this story I try and hope that some of the fears of my first time buyers are allayed. I’ll also probe with the interesting question to get them thinking also… why do you think it is, that real estate, is the one asset class that the banks are willing to lend money out on quiet readily. They are definitely not so willing when it comes to funding all the business proposals which people bring to them. It’s because the banks know that real estate is safe! Prices may drop and go through cycles but over the long haul they always come back and ultimately go higher.
So if you’re a first time buyer and you’re experiencing some anxiety, hopefully this post has put you at ease somewhat, if not asleep like some of my clients. J
Have a great week everyone, and feel free to comment on the experiences from your first time or if you are right in the middle of looking for your first home.