My two cents: as long as you possibly can without going crazy.
A lot of my first time buyers are itching to get out of their parents’ basement (or their kiddie bedroom, if that’s the case…), but they need to first weigh the pros and cons of living at home versus moving out on their own…
I love my Mom and Dad, and I’ve roomed with both of them in my adult years. I’ve taken trips to Idaho with my Mom and my wife for weeks at a time, and I’ve slept in a tent on Mount Kilimanjaro with my Dad. I have no problem living with them in small doses, now, as 33-year-old, but had you asked me if I wanted to live with them at 22 or 23 years old, I think I might have given you a different answer…
The most common reason I hear from a young person looking to buy their first condo is, “I want to get out of my parents’ house.”
And these kids range in age from 22 to 32. I’ve had clients that at 32-years-old, are still living at home with their folks, and it seems that every year, that number increases. Once upon a time, you flew the coop as soon as you turned 18. Your dad shook your hand on the front step of the house and said, “Good luck, son.” That’s no longer the case…
Toronto is full of “kids” in their 20’s that still live at home, and personally, I see nothing wrong with that.
Toronto is expensive – from the daily cost of living, to the cost of real estate, and if a young man or woman can save $10-$15K per year by living at home and salting away income, then more power to them.
The flip side of the argument, of course, is that most people this age don’t want to live at home anymore! After two decades under their parents’ roof, they’re looking to get out on their own, spread their wings, and start experiencing life for real.
I see both sides of the argument, and I can argue both sides as well. And probably once per week on average, I’m contacted by a young person looking to move out, and we examine the pros and cons from head to toe.
Often, I have the young man or woman that puts ZERO value on living at home, ie. the free meals, laundry done by Mom, etc. And just as often, I have the young person who puts ZERO value on “growing in life” as they move out on their own.
But I find that when these youngsters are number-crunching, they’re already leaning one way or the other.
Last week, I spoke to a girl who wanted to get out of her parents’ Oakville home as quickly as possible. I played devil’s advocate, and said, “You’re a C.A., working downtown – you must be making some good bank! Maybe you just keep stuffing your mattress!”
To my absolute amazement, she replied, “Well the mattress is part of the problem. I can’t bring a guy home when I’m living down the hall from my parents!”
She went on to tell me, “Have you seen Trainspotting? It’s been sort of like that, and I’m tired of it.”
I had to seek clarification from a friend of mine who is a movie buff, and he reminded me of the scene where an unsuspecting guy, who had just spent the night with a girl he met, ends up having breakfast with a man and a woman who he thinks are the girl’s roommates, when in fact, they’re her parents.
As I said – everybody has his or her own evaluation criteria, and certain things – such as the ability to be free and clear of your parents in ALL respects, have tremendous value.
The point I’m trying to make is that it doesn’t all come down to dollars and cents, even if that’s the most important calculation you make.
You have to consider the intangibles, and you’d be hard-pressed to convince me that there aren’t any.
I spoke to a young man earlier this year who is living in Markham, and commuting to work downtown each and every day. He said he pays his parents $400 per month in room and board, and he spends $1,000 per month, all-in, for his car lease, insurance, and gas. He told me, “If I lived downtown, I’d ditch the car, and get a TTC Metropass. That g-note turns into a c-note immediately!”
But then he added, “Instead of spending $1,400 per month, I could rent for $1,200, and save the difference. If I can’t find a place for $1,200 per month or less, then I’d stay at home.”
So I asked him, “What about the intangibles?”
He didn’t follow.
“What is it worth, to you, to live downtown?” I asked.
He followed up with, “Well, as I said – that $200 spread, or, say, $400, if I could find a place for a thousand bucks!”
Maybe I wasn’t leading him enough, so I said, “Don’t you think there’s a monetary value to living out on your own? I know it’s tough to put a price on, but isn’t it ‘worth’ something to be living downtown in your own place, as opposed to with your parents?”
He said he’d never really thought of it that way. But you have to. You just have to!
There IS a value to growing up, and getting out on your own, and even if you’re an accountant or a financial analyst, who is accustomed to counting every single penny – you have to admit that there’s an intangible value to moving out of your parents’ place.
So continue with the example above; isn’t there a value to saving two hours per day, or ten hours per week in the car, driving back and forth from Markham to Toronto? I think there is!
That young man who drives in from Markham each morning, and home each night, is spending TEN hours in his car, which is ten hours he could be working at his job and generating more income, or ten hours he could spend watching Challenge Rivals II on MTV (sidebar: I am forced to watch this every Wednesday night by my wife).
But an opponent to this argument would also add that this young man is eating three square meals per day for free at home, and he’s getting other intangibles, such as laundry service, cable TV and Internet, a “common area,” ie. the garage where he lifts weights or the backyard where he hangs out with his friends, and a slew of other benefits that also have to be weighed, and somehow monetized, as “intangibles.”
So I guess the point I’m trying to make is that whether you’re an advocate of staying at home and saving money, or getting out on your own and growing up, there are intangibles that you have to consider.
And then there’s a line that you have to draw in the sand when it comes to cost.
If you’re 22, and you’re living at Yonge & St. Clair with your parents, for free, and your only cost is the $100/month TTC Metropass that you use to travel a paltry ten minutes downtown to your office, then buying a condo and suddenly spending $1,500/month in mortgage, $400 in maintenance fees, $200/month in taxes might not seem worthwhile.
Some of the most hardened real estate salespeople will shout, “Buy a place, and start paying down mortgage principal!” But I’m not convinced that’s a solution for all.
To go from virtually nothing, to $2,100 per month all at once is a huge step for some people.
And this, of course, leads to a conversation about the appreciation of the property a young person buys, and then we’re into crystal ball territory, trying to forecast the market over the next 3-5 years.
A family friend is 22-years-old, and he is so happy living at home, that he puts ZERO value on the idea of “moving out and starting life.” He’s only concerned with the current state of the condo market, where he could get a deal, the long term growth outlook, etc. He couldn’t possibly care less that he’s sleeping in a single bed each night with baby photos on the walls.
So I suppose the question I would ask a young person is this: “What’s it worth, to you, to be out on your own?”
If it’s worth absolutely everything, then by all means, don’t concern yourself with capital apprecation, monthly carrying costs, and lost savings.
If it’s worth absolutely nothing, then stay at home with your parents until you’re 42, and they’re looking to downsize and kick you out.
But my guess is: everybody falls into their own category, and you’d be hard-pressed to find two people with identical evaluation criteria…