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Should you buy a starter home in the new Windsor real estate market?

Should you buy a starter home in the new Windsor real estate market?

Should you buy a starter home in the new Windsor real estate market?

In a housing market like Windsor, where prices are  still reasonable compared to other markets, they are continuing to rise. Many people especially first time  home buyers are simply priced out of the market for the average house because of the bidding wars in Windsor. This is especially true for first-time buyers. But what about the idea of buying a starter home to get into the real estate market earlier and take advantage of the rising market?

A starter home is a below-average property that you can  plan to live in for the next 3-6 years or so, and then sell for profit so you can move into a more permanent home. A 2015 study by Genworth Canada showed that 50% of first-time buyers see their first home as a starter home, from which they plan to move out of within 10 years.

In Windsor the starter homes have become very  much in demand given the reality of the Windsor real estate market. They are usually  in need of some work and are priced competitively.  In Windsor we see a great many first time home buyers move into the downtown area as well as the west side of Windsor

Starter Homes

Generally speaking ,  there are four types of starter homes:

  1. Attached homes- such as townhomes and semi detached homes
  2. Condos- there seems to be an increased interest in condos in Windsor compared to prior years.
  3. Homes in less desirable areas- are areas with some stigma attached to them and they tend to be more run down.
  4. Fixer-Uppers- Usually require extensive repairs and renovation, a word of caution though is that fixer uppers can be costly because of the unknowns, they can be time consuming , this may be too much for a first time home buyer considering unexpected expenses for budgeting purposes

What to Consider Before Buying a Starter Home

There are four major considerations when it comes to buying a starter home:

  1. The housing market in that area
  2. Your timeframe
  3. Your needs
  4. Your alternatives

If you hope to profit off of a starter home, it’s very important that the housing market is rising. Historically, Windsor’s prices have been on a steady increase until the recent  higher than historical average trend in the Windsor real estate market. Most, including myself believe that the prices will continue to rise, especially over the long term. Though no one can predict the future  with 100% certainty. There is always that risk that the prices may stagnate or even decline but those risks are increased  the shorter your time frame is .

If you are considering a starter home your intention should be to keep iot for at least 5 years because it generally takes 5-7 years to break even with the expenses of home ownership and the cost of buying or selling a home. Also, you are usually paying off the mortgage interest first of your mortgage rather than the actual principal of your mortgage, However  there are people that have kept their starter home for a much shorter time frame and still made a nice return on it , this all depends on  how fast the market prices are rising in a given location.

The third consideration is your needs.  For example if you are planning to have a family soon you may end up having to sell sooner and losing money on that home, or if you don’t like commuting, it may be less expensive for you to rent  close to your work.

You do have alternatives. One option may be instead of using your savings and getting a mortgage to purchase a starter home, you can continue to rent  and continue investing in your savings or buy low risk GICs, bonds or mutual funds, or go the higher risk route and  invest in stocks and index funds. Another option is purchasing a home or cottage elsewhere in the country or province you live in  and renting it out.

 

Does it Make Sense for Me to Buy a Starter Home for You?

Given all the above considerations, it might make sense for you to purchase a starter home if

  1. You’re in a rising housing market.
  2. Your time frame is at least 5 years (although you could sell sooner if a good opportunity arises).
  3. You actually find a starter home that meets your needs for the next 5 years or so
  4. You don’t like your other alternatives.

You might be thinking, “those are some criteria to meet!” Yes that is the case , and that’s because purchasing your first home and getting a mortgage is a very important step in your life.

Here is some advice:

Look at properties that are up and coming neighborhoods that require some  TLC. You can also look for a property that offers an opportunity for a second suite for you to use or rent out for some extra income to help with your mortgage. Another important piece of advice would be to look for a starter home that you can potentially add to the house should you need more space, because come time that you  are  looking for larger property you may face to same obstacles in affordability

Buying a starter home is a great way to get into the rising Windsor real estate market as early as possible. But it’s also particularly important that you don’t rush. If you’re not sure whether buying that particular starter home is a good fit for you, then it’s better you don’t. In the mean time, you can remain renting and put away savings in a low-risk investments  while continuing to search for the perfect fit starter home.

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Nejla Horasan

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