I had this conversation with a would-be first-time condo buyer yesterday, and since he was on a budget, I kept suggesting items and features that he could give up, in order to get into the market.
“No, I can’t give that up,” he said, each time I made a suggestion.
Feature after feature, he kept saying “no.”
I finally asked, “Are you willing to give anything up?”
If you’re a first-time buyer, you have to prioritize your “wants and needs” list…
I believe I wrote a similar blog for first-time home buyers a while back.
I can recite that from heart, because I do it so often.
Trying to get into the housing market, around $700,000 or $800,000, means you have to give up something major!
- The 3rd bedroom
- The 2nd bathroom
- Finished basement
- Lot size
Those are the five items I recite every time I have this conversation with home buyers.
The list may be in order of importance, but it certainly isn’t in order of what I’d give up first.
Parking is something that I tell buyers to give up. Sure, there will be those times when you carry your baby in one arm, and groceries in another, through snow, two blocks, from the car to the house.
Or is that just in your mind? Is that the “worst case scenario” you’ve invented for yourself?
Finished basement is insignificant, in my opinion, since you’ll pay less for the house, and you can actually add value by finishing it down the line.
In the end, we could make an argument for all of these, but giving up something like a third bedroom is a major concession, and it will affect how long you can stay in the house before you outgrow it. So with that in mind, you try to work with the other four, or items that we don’t have listed below.
Believe it or not, it works the same way with a condo.
Every buyer has a budget, and every buyer has a “wants and needs” list.
So whether you’re looking for the $800,000 house, or the $300,000 condo, you’re going to have to make concessions.
I spoke to a young man the other day who is going to be starting his first job down at King & Bay, and who wants to live “somewhere downtown.”
Large area, I know.
But perhaps that’s an asset, when you’re looking for a lot of other things.
I asked him if he needed parking, and he said, “Yes, I want a spot.”
I said, “Do you own a car?” and he said that he didn’t, but he wanted a spot for friends when they visited.
I asked him if outdoor space was important, and he said “yes.”
I asked him if he put a value on a view, and he said “oh definitely.”
Every time I asked him about a feature of a condo, I realized that he just automatically said “yes” and that perhaps it was time to turn it around, and let him make suggestions to me.
Unfortunately, that didn’t work either!
He simply said, “I need a big space, I like newer condos, and I need parking. I want a great view, high up, with a balcony; somewhere I can barbecue. I like high ceilings, I like lofts, and while I like the open concept of the loft I want some privacy too, and defined rooms like in my family home. A second bathroom would be great so my friends don’t have to use my own. I don’t cook a lot but I might if I get a girlfriend, so I’d like a big kitchen and a gas stove. I kind of want a den too, not necessarily for an office but just to store stuff in. Oh and I need a storage locker too.”
I finally cut him off.
I knew where this was going, as I’ve had these calls before.
I’m not blaming the kid for this; not everybody is a real estate expert, and it was clear to me that he was living at home, and had everything he could ever want, including food and laundry service!
He told me his price point was $300,000, but he could probably stretch to $350,000, which I found funny because a “stretch” shouldn’t be 17%.
And once he stopped talking, I took a breath, and tried not to be rude.
He was young, talked fast, and it came out in one long stream.
So I tried to talk slowly, break it down, and almost give him bullet points.
“You just named about twenty things that you want.”
“All of the things you want are features that cost extra.”
“You are on a budget.”
“$300,000 in the downtown core is pretty much entry-level.”
“Your wants and needs are not well-defined enough.”
And with that last point, he asked me what I meant.
I explained to him that to say he doesn’t drive, and doesn’t own a car, but wants to have a parking space for his friends is absolutely insane.
A parking spot is going to average $30,000 in the downtown core, and he simply couldn’t afford one unless he “stretched” to $350,000.
But having said that, why buy a $350,000, 1-bed condo with parking, just so your friends could park there once in a while, when that $350,000 could buy a 1-plus-den, without parking, and he would get a greater benefit from the den?
Having said that, why would he want a den if he was “going to use it to store stuff?”
He liked open concept lofts but wanted defined rooms? That didn’t make any sense.
And the features he wanted – like a second bathroom, were beyond features at his price point; they were luxuries.
Like I said, I don’t blame him one bit.
When I was a kid, and it was time to make a Christmas list, I always knew I was overdoing it.
First, I figured you won’t get what you don’t ask for.
Second, I figured I didn’t want to ask for ten things, as I might only get ten things, so I may as well ask for seventy.
And third, I figured the more I asked for, the more I’d get, as I thought my parents would work on a proportional basis. So if I asked for twenty things, and they got me ten, then maybe if I asked for seventy things, I’d get thirty-five.
But I was eight-years-old.
This young man looking to buy a condo was in his early-20’s, so just as my father told me, “David, there is no Santa Claus” as I prepared to board the bus to Camp Kawabi in July of 1986, I told this young man, “You’re not getting anything close to what you want.”
That was the imperative word: want.
I told him that he should sit down and go over his needs, and do so on a relative basis.
Just as you need to ask yourself, “Would I rather have a finished basement, or a third bedroom on the upper level?” when looking at a house, you need to play one item off the other with a condo.
As a first time buyer, looking at $300,000 – $350,000, this should be your list:
- Square Footage
- Living & Dining Area
- Outdoor Space
Notice I didn’t say location, which is the most important of all?
I encourage my first-time buyers to look at that list above, and identify which they can compromise on.
Then I can tell them where they’ll find that, in their price point.
If you don’t have a car, don’t even talk to me about parking. And if you do have a car, decide if you need it. If you use it for grocery shopping on Sunday, then get rid of it, or be prepared to give everything else on the list up.
Square footage is important, but it’s also just a number. Sometimes I’ll ask clients to tell me how many square feet the unit is, and do so for the next. Half the time, they think the bigger unit is smaller, and vice versa. So don’t get stuck on a number.
Rather than the number of square feet, you should look at the living space. In a $300,000 condo, you’ll be hard pressed to have a dining area, in addition to living, and kitchen. If you’re single, you can eat at the breakfast bar, or on your coffee table, from your couch, in front of your TV – like every single guy, ever.
A den is quite often a useless space for a first-time buyer, and if you don’t work from home, then you don’t need an office. And if you’re thinking, “It would be nice to have a place for my friends to crash when they get drunk and can’t get home,” then you’re simply a better friend then they are.
Outdoor space is fantastic, trust me – I have a 1,200 square foot terrace. But that’s a luxury I paid for, and I only use it four months a year. So ask yourself if you’d use a 4 x 6 foot balcony, and if so, for what. Would you read out there on Sunday mornings? Really? And don’t tell me, “I want a place for my friends who smoke.” Because that’s worse than wanting a den in which they can crash…
The age of the building and unit are going to be tied together with the style and condition. I’ll take my clients into a unit with 9-foot ceilings, and then 8-foot, and ask them if they notice a difference. If they don’t, then that’s one more reason why a slightly older building might offer more value. Newer buildings are more expensive, and it’s partly because of the finishes, but also things like ceiling height and size of the windows, ie. items you can’t change.
Will you run on the treadmill? Don’t say “yes” if you go to Goodlife every morning before work, because you’re paying for those amenities via your maintenance fees, whether you see it or not. Every buyer says, “I want a gym in my condo,” but most never use it.
Some people really, truly do value a view. Others just see it as something nice when it’s right there in front of them. Would you rather have an exceptional lake view, or a 40 square foot den?
Play each feature off the next, and then put them in order.
If you’re looking between $300,000 and $350,000, you can’t get everything on that list, unless you’re willing to live outside the city.
And again, we’re not even putting location on that list above.
So now, play these items off one another, and add in location.
For example, which would you rather have:
- 1-bed, 1-bath, 575 square feet, Juliette balcony, with parking, at 230 King Street in the St. Lawrence Market
- 1-bed, den, 2-bath, 660 square feet, 180 square foot terrace, no parking, at 260 Sackville Street in Regent Park
If you can’t answer that, then you have to go back to the drawing board.
And if you can’t answer that, then don’t worry – you’re exactly where every first time condo buyer is when he or she starts to search…