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6 takeaways for Millennials wanting to break into the housing market

If you haven’t checked out the Real Money Talk podcast yet, you’re missing out. However, we’ve got a little sample for you, so you get a taste of what you can expect from the (soon-to-be) no. 1 personal finance podcast in Canada.

On our 2nd show, we talked about real estate investment with James Laird, founder of CanWise Financial – one of the top rated mortgage brokerages in Canada. He also owns several of his own investment properties. We asked him about Millennial housing and how those Millennials can navigate the increasingly confusing housing market. Should Millennials get into the housing market? How should they do it? We dig in, have some fun, and discuss investment properties.

These are six insights from the conversation.

Aspiring homebuyers definitely have it harder than their parents.

“If you look at the historic home value-to-income ratio back when our parents bought houses, they were buying something for maybe four times their income. But now, especially in the major markets, the average home price is approaching ten times the average income level. So, it’s a challenge. And I think young people are trying to figure out what they should i do; should they change my expectations? Is buying home still the right thing to do?”

It’s especially challenging for aspiring homeowners in the major urban centres. 

“If you’re in one of the major urban centres, such as Toronto, Vancouver, Montreal, and Ottawa it’s a much different conversation than if you’re in the rest of Canada where that dream of homeownership is still very much possible. Young people seem to be piling into the major urban centres so it’s sort of a catch-22; there are houses available for 200k all over the place they just might not be close to where you want amenities in the urban centre.

Why buyers should consider housing as an investment.

“An interesting concept, which very few people do, is you could actually decouple where you own real estate from where you live. So, for example, you could independently make a decision to buy a home and rent it out in the best rental market in the country and then, independently of that, you could decide which market you actually want to live in. And so that actually decouples your investment decision from your lifestyle decision.”

It’s an anxious time for Millennials in housing. 

“It’s it’s an anxious time if you’re millennial. I really feel for this group of people because on one hand home prices have been running away from them on the other hand regulations have tightened up. Then the third thing is that rental rates continue to rise so all these things are happening and they’re saying, ‘look, I have less and less disposable income every month to even try to save the down payment to eventually enter the housing market.’ So it’s a challenge and I think one thing you can do when you’re young and you’re single is share housing (with friends or family) for as long as you can.”

Realize that money spent on rent is money you’ll never get back.

“You just have to know that every dollar that you spend on renting a place is a dollar you are never going to see again. That money is gone. For personal finance we have to be very careful with the dollars that we know we are never going to see again and renting a house is probably the single biggest expense. So, think carefully. Do we really need to live by ourselves when we’re 23? Should we live in a basement? Could we share with more people?”

There’s a disconnect between what developers want and what homebuyers want.

“The end-user wants three bedrooms but if you’re a developer you’re probably thinking is how can I get the most bang for my buck? That’s probably less space, small units, and selling them to investors as opposed to a family. There’s no incentive for them to think in terms of the end-user as opposed to someone that’s investing.”