I work with a lot of aspiring house owners. It’s a typical scenario: They own/rent a condo and now want to transition to a house with a cute backyard, a great floor plan and something close to shops and transit. They say they don’t mind a little work but that they don’t want a gut reno. So, we get them pre-approved, look at what the pre-approval budget can get them and go out and look. We see a bunch of houses, one tickles their fancy, and one thing leads to another and they want to make an offer.
Then the review of the home inspection. And the shock.
“OMG, we can’t buy this house. It needs a new roof in 5 years. And there’s some knob and tube wiring still in the house. And that other one! There the home inspector found efflorescence in the basement. The chimney needs repair too and the furnace needs to be replaced.”
Guess what. Let me tell me something. If you want to buy a house in Toronto — and to be clear, I’m not talking about a new build townhouse or a 10-year-old house that is really more Scarborough than Toronto — you are going to have to understand that that beautiful 100-year old Victorian or Edwardian comes with an undisclosed maintenance tag. Toronto houses cost money AFTER you buy them too. Having to pay for a new roof sucks. And footing the bill for replacing all the knob and tube in a home is a super unglamorous expense. But that’s the cost of buying an old Toronto house in Riverdale, Roncessvalles, Leslieville, Leaside, The Beach or another Toronto neighbourhood.
In a Toronto condo you pay a monthly maintenance fee that sometimes includes utilities (heat, hydro and water) but also covers building insurance, maintenance of the grounds, the common elements, the hallway carpet, the gym upgrade….all that stuff. Condo buyers grumble about having to pay this fee but think about it – if you’re not going to pay it and your neighbour isn’t going to pay it, what’s going to happen to your investment?
Houses on the other hand DO NOT come with a maintenance fee. They come with a listing price that usually goes above asking. I watch it happen sometimes when buyers get caught up in how much they can afford and put in their top dollar….but then panic when they realize how badly they need a reserve for maintaining that house in the future.
If you are an aspiring Toronto house buyer or a current house owner I want you to take this special exercise.
Are you ready?
*****PUT SOME MONEY ASIDE FOR
And now some numbers… (not to freak you out but to make you very aware not to spend every single penny in your bank account on a mortgage payment)
1. HYDRO: The average hydro bill for a typical 3 bedroom Toronto home is $125-200/month.
2. GAS: Your average gas bills are around $125-150/month
3. WATER/SEWAGE/GARBAGE: The city charges for water by how much you consume and for garbage how big your bins are. You are probably looking at (combined): $40-$60/month
5. PROPERTY TAXES. It’s on every single listing you’re looking at. Using an $800,000 Toronto house as an example, $475/month
6. HOME INSURANCE: This number will vary greatly, depending on how much “stuff” you have and your insurance claims history. My clients usually pay around $80-100 a month for home insurance.
7. CARE AND MAINTENANCE: Everything from getting the furnace replaced to the ducts cleaned to the basement waterproofed. And let’s not forget that you’ll probably need to replace the roof at some point ($8,000-10,000) along with appliances…. Experts suggest you budget 1-3% of the value of your home every year to deal with maintenance, upgrades and repairs.
8. PARKING PERMIT: (because most Toronto houses have no parking spot or just 1): $16/month
Right now you’re thinking, “Holy crap we can’t buy a house. We don’t have the money.” No, that’s not the point of this. The point is for you as a buyer or an already owner to recognize that you need to (1) put money aside for rainy days and budget for unglamorous house expenses in your future and (2) understand that house ownership is not for kids. You’ll recognize this the first time you have to take out the trash when you’ve never had to do it before. Trust me.
If you have questions about whether or not YOU can afford to buy a house (or if house ownership if for you), contact me any time so we can work through the variables on your specific situation.