Is it wise to purchase property?

[bharat999]

Hi,

We are planning to settle in Edmonton towards the end of this year. I have been looking into properties to purchase - what are the added expenses that I should bear in mind? :-\

We have always lived a debt free life and would want to purchase outright - despite a few drawbacks (like having soft loans from family)

Any information on other considerations that I need to take into account would be most appreciated.

Thank you!

 

[ALRIVAS]

Hi bharat999 I'm a Realtor in Toronto but in General in Canada you need to cover closing cost that involve:Lawyer,registration of you mortgage if any property tax,land transfer tax,moving cost,mortgage broker fees if any and realtor commissions if any.
In Ontario is around 2% of the purchase value excluding Toronto.

 

[torontosm]

Hi,

We are planning to settle in Edmonton towards the end of this year. I have been looking into properties to purchase - what are the added expenses that I should bear in mind? :-\

We have always lived a debt free life and would want to purchase outright - despite a few drawbacks (like having soft loans from family)

Any information on other considerations that I need to take into account would be most appreciated.

Thank you!

My advice would be to avoid purchasing any property for a number of reasons:
1) You are just moving, and it will take time for you to figure out which neighborhood you like, which schools are the best for your kids, etc. Rent for a year until you can figure this out.
2) The property market in Alberta is already softening, and should deteriorate further given the weak economic conditions. In about a year, you will see prices that are substantially lower than today.
3) Mortgage rates in Canada are declining, so there is no rush for you to purchase something immediately.

 

[ALRIVAS]

One last thing I don't work in Edmonton but I will recommend you hire a realtor as that will help you have a better experience also they can show you what the best place is for you according with your criteria.
Good luck.

 

[steaky]

My advice would be to avoid purchasing any property for a number of reasons:
1) You are just moving, and it will take time for you to figure out which neighborhood you like, which schools are the best for your kids, etc. Rent for a year until you can figure this out.

I disagree. It is still an open option to buy property at the time they move to one city. If they don't like the neighborhood or school catchment, they can always rent it out (or sell it) and look for other places.

 

[torontosm]

I disagree. It is still an open option to buy property at the time they move to one city. If they don't like the neighborhood or school catchment, they can always rent it out (or sell it) and look for other places.

Except then they will have to pay brokerage fees and the land transfer tax, which could amount to 5%+ of the total purchase price. Doesn't seem very prudent to me. Especially in a declining market where they will likely incur a capital loss anyway.

 

[steaky]

Except then they will have to pay brokerage fees and the land transfer tax, which could amount to 5%+ of the total purchase price. Doesn't seem very prudent to me. Especially in a declining market where they will likely incur a capital loss anyway.

That is when they sell the property. If buying, there won't be any brokerage fees.

 

[torontosm]

That is when they sell the property. If buying, there won't be any brokerage fees.

Right, but your advice was to sell the property if they don't like it. All I'm saying is that if they make a rash decision, it could end up costing them over 5% of the total property value, which is the entire down payment for many people these days. Not a very fiscally sound decision, especially in a market with a grim outlook such as Alberta.

 

[steaky]

Right, but your advice was to sell the property if they don't like it. All I'm saying is that if they make a rash decision, it could end up costing them over 5% of the total property value, which is the entire down payment for many people these days. Not a very fiscally sound decision, especially in a market with a grim outlook such as Alberta.

No, I also said they can rent it out. They don't have to use a broker to find tenants.

 

[torontosm]

No, I also said they can rent it out. They don't have to use a broker to find tenants.

So tie up their capital in a place they don't want, versus taking the time to find a place they like and buying that instead?

And, you will likely have to use a broker to find tenants anyway, which will cost 1 months rent and a lot of hassle.

 

[steaky]

So tie up their capital in a place they don't want, versus taking the time to find a place they like and buying that instead?

And, you will likely have to use a broker to find tenants anyway, which will cost 1 months rent and a lot of hassle.

With any investment, people tie up capital and they want to make some sort of return out of it. If they don't want, why would they buy it in the first place?

Many people don't use brokers to find tenants anyways. For example, I often seen posters post in this forum looking for potential tenants.

 

[canadaforall]

Right, but your advice was to sell the property if they don't like it. All I'm saying is that if they make a rash decision, it could end up costing them over 5% of the total property value, which is the entire down payment for many people these days. Not a very fiscally sound decision, especially in a market with a grim outlook such as Alberta.

I think they have to keep it at least 5 years before selling.

canadaforall

 

[scylla]

That is when they sell the property. If buying, there won't be any brokerage fees.

Yes - but there will be land transfer tax. Depending where you live, land transfer tax can be significant.

 

[torontosm]

With any investment, people tie up capital and they want to make some sort of return out of it. If they don't want, why would they buy it in the first place?

Many people don't use brokers to find tenants anyways. For example, I often seen posters post in this forum looking for potential tenants.

That is exactly my point. How can someone who just moved here know what they want (i.e, which neighborhood is best suited for them, which schools are better for their kids, which locations are best for transit routes, etc.)? That's why I recommended they rent for a period of time until they figure out the city. However, you maintained that they should buy immediately, and they can sort it all out later by selling it if they didn't like it. you sound just like a self-serving real estate agent.

As for making a return, look at what's happening to housing prices in Alberta right now. The only return to be made in the near term is a negative one.

 

[scylla]

That is exactly my point. How can someone who just moved here know what they want (i.e, which neighborhood is best suited for them, which schools are better for their kids, which locations are best for transit routes, etc.)? That's why I recommended they rent for a period of time until they figure out the city.

I completely agree. I think doing otherwise is completely illogical and a bad financial decision.