nav
Home
About
Contact
MediaCenter
Resume
Photos
Stories
Movies
Books
Wiki
FAQ

fav sites
Gizmodo
Engadget
Slashdot
News
CNET
Wired
DazeReader

friends
Adam
Andrea*
Angie
Benny
Brad
Chris
Christine*
Craig*
Curt
David*
Donny*
Emily*
Gary
Gords*
Jacks*
Jam*
Jesse
Jessica
John
Jon*
Kevin
Lauren
Maeve
Mark*
Ming
Nat
Nick
Nicole*
Orr
Paul
Rafi*
Rannie
Tracy

UW WebBloggers
join
random
prev
next

Matt's guide to buying a house if you're a student

Short Version:

• Buy close to school
• Buy unlicensed and then license it. This will maximize your profit when selling.
• Watch the timing on the close b/c you'll have a hard time finding renters in the middle of the term if your house didn't 'come with tenants'
• Plan out the worst case scenarios and be sure you can stomach them (i.e. what if you get no renters for your first 4 month term?)

Long Version:

Less of a guide, more of a story:

A friend's landlord was looking at selling her condo 4 bedroom condo close to the school and this got me thinking about buying. Unfortunately she closed a deal with someone else with out even offering me a chance to bid so I started to look for other places. At first I was really hung up on getting a condo in the same unit she had sold one in because it was so close to school so I direct mailed everyone in the development but didn't get any bites.

I then found a real estate one day when I called to inquire about the price of a place I saw on the way to school (the place had 22 bedrooms and was $650k (who knew!)) and I told him my situation. My situation was that I was looking to spend less than $180k on a place within 15 minute walk of a certain building on campus (the MC building of course).

Every morning he would email me a list of places that just came on the market and then I'd call him if interested and we'd go take a look. During the period I was looking the market was pretty hot so you'd find out about a place at 8am, look at it at 10am and have to decide before noon if you'd make an offer. This was pretty stressful. You'd see lots of bad places, and occasionally some that looked good but for some reason you'd hesitate.

During this process I learned a lot about the difference between a normal residence and lodging houses (Waterloo Guide Book to the Licensing of Lodging Houses). Lodging houses require a license which requires a lot of work but it raises the price tag of a place. It looked like I couldn't afford to buy a lodging house because they were generally priced $75-100k above what a non-licensed house would be. But if I got lucky I could buy a house that I myself could license but those too were slim pickings because Waterloo has very restrictive license requirements (in Waterloo you need to find a house that is zoned GR (most of Erb St is GR)).

While looking for houses I approached the bank (Royal) and got (unofficially) pre-approved for a mortgage. I was approved because of my income. If you don't have substantial income (lots of online calculators will tell you what you need) then you're going to have a problem. Now you've of course figured out that a mortar will be $1000/mn and that you'll pull in $2000mn in rental income but if you want the bank to give you a mortgage based on that you'll have to bring them rental agreements which is a lot of work because its hard to rent a house out if you don't already own it! So needless to say I was glad that I had sufficient income and this wasn't a problem.

The other banking factor is that if you can't put 25% down you'll need to get CMHC to insurance your mortgage against defaulting. This isn't cheap, but it is a (piece-wise) variable fee, so if you say put down 10% (like I did) you can save a lot more money than if you had put down 9.9% (it's a silly scale).

Other costs involved: down payment (>=5%)+legal (~$400) + legal disbursements (~$1500 in my case (estimate at 1-2% of purchase)) + moving expenses (i.e. gas connection fees..)

So anyhow.. Eventually you'll come across the right house. Now I urge you to wait till you feel that you've found the right one. I had some regrets during early on in the process but now I'm glad I didn't jump the gun.

Now I found my house while walking home from my car garage after dropping my car off and called my agent up, he got me in that afternoon, by that evening I was at his office drafting an offer. I did not get the house inspected and I sure hope that's a decision I won't regret in the future :) (the house is still standing so it can't be all that bad).

Now I bought a house built in 1925 so it's pretty old. I also lucked out and I have a great set of tenants who tore down the awful wall paper in their rooms and then repainted them with colors of their choice (I paid for paint+supplies). I've also suckered them in to helping me fix up the upstairs bathroom (removing the tile, re-finishing the walls,..), the kitchen, and now we're re-finishing the hallways. Not all tenants will be so eager to provide you with free labour but if you pick the right ones you might get lucky :). Or you can work out some reduced rent for work situation or cut them a cheque when you sell the house.

Now my deal closed 5 days before the beginning of a new school term so I didn't have much lead time before my tenants moving in which meant there was some chaos. I.e. it took a while to get a shower installed (the house didn't come with one). So this brings up a very important point.. Timing is crucial for student housing if you aren't buying a house which has tenants because you can't have it sit empty for 3 months. Therefore plan you're closing appropriately, line up tenants before hand,...

I'd also warn that you need to book renovation people well in advance so keep that in mind. You can't move in, and then call a plumber to come in the next day! (Unless you have lots of money or have personal ties or get lucky).

Also watch out for all the little costs.. I.e. washer/dryer, fridges, house, BBQ, lawn mower, shovels, (power) tools and all those other little things that landlords are expected to provide.

I also got into a pinch when the insurance company requested an electrical safety authority inspection certificate. One didn't come with the house and it cost me $3k to bring the house up to spec! Had I had the house inspected before buying it, or making it conditional on an inspection probably would have alerted me to this problem and would have enabled me to get the seller to pay for all or at least half of that cost. Or I could have gone with a less stringent insurance company.

Now with the purchase out of the way, you have to fill your house up with people which shouldn't be too hard since all your friends will be looking for a place to live. Of course renting to friends is sometimes a little dicey if you aren't able to separate the business and friend aspects of your relationship but so far I haven't had a problem. Realize they may be bitter if they know you're making money but explain that you have costs besides the mortgage and that it takes time to run the place and bleh bleh bleh. It also means you might be a little less willing to have a big blow out keg parties because after all the house is yours and if it gets damaged, yes you'll hit them up but how uncomfortable a situation is that going to be?

Since you own the house and live with your tenants you'll be playing 3 roles:

• Home owner
• Landlord
• Tenant

If necessary clarify these roles with your tenants/friends so that there is no confusion. For example you don't want them to stick you as a home owner/landlord with a cost which really should be a shared tenant cost.

Okay I think I've run out of steam/advice so leave some comments below (but email me if you do because otherwise I won't know to respond to them).

[]