Meeting Scott McGillivray, the host of HGTV’s Income Property

With home prices rising faster than inflation, first-time homebuyers are finding it hard to afford a home in Canada’s major cities. If you’re feeling discouraged by rising housing prices you’re not alone. The good news is, it’s still a fantastic time to buy your first home.

I was fortunate enough to sit down with the host of HGTV’s Income Property, Scott McGillivray, to discuss buying a home for the first time, owning versus renting, and houses versus condos. Here are some tips from the bona fide real estate expert himself.

1. Many first-time homebuyers in major cities are feeling discouraged by the lack of housing inventory. Is now still a good time to purchase real estate?

Oh, absolutely. If there’s a lack of inventory, if you can get your hands on something, you’re obviously doing well. I always say, it’s not about timing the market, it’s time in the market. If you’re buying it for a home, you need somewhere to live, then absolutely, you need to buy something. If you’re buying it as an investment, you don’t necessarily want to get into bidding wars with people who are making emotional offers, because you will get into some situations where people will make offers that are absurd that make no financial sense at all. As long as you do your math, run your numbers, the house could still cash flow, then it’s a fantastic investment.

For the first-time homebuyer, the idea of the income suite makes things much more accessible. Unfortunately, it’s not a secret anymore. Some guy did a show about it and let the cat out of the bag. (laughs) Those are the properties that hold the most value because even if there is some sort of correction or interest rates go up, you have that extra source of income.

2. What advantage does buying real estate offer over renting?

You’re investing in your future instead of investing in someone else’s future. As a renter you pay money to somebody else and they are the ones who capitalize on that, versus if you own it yourself and pay that rent money towards a mortgage per se, you’re paying down the asset, plus you’ve got ownership.

The other advantage is leverage. With homeownership, you’ve got the bank that is willing to finance a large portion of it, so you may have access to more than you think.

The third thing is the pride of ownership. That’s hard to measure financially, but there’s definitely a big difference in how you treat your home, how you feel about your home, how you feel about your future and your family when the property is yours. When you look at the hierarchy of needs, obviously shelter is one of them. When you own it, it does something nice for you.

3. What are your top three tips for first-time homebuyers?

Stay within your budget at all costs. Don’t get stuck in a bidding war. Don’t think you’re going to win a bidding war because you actually lose with a bidding war when you’re the top dog.

Look into the idea of an investment property, Income Property style. Something with a secondary suite that you can live in yourself if you’re a first-time homebuyer – you might be single or a young couple. Typically it’s better to do it sooner than to need it later when you might need to occupy the space because you have a larger family, you may have kids. I always say explore that idea  first.

The last thing is to find a way to put 20 per cent down. Avoid the insurance premiums of putting less than 20 per cent down. That is a challenge and a good indicator if you’re ready to own a property. I often find if people can be disciplined enough to come up with 20 per cent down on their home, they’re often ready to take on the financial responsibility of a home.

4. Many first-time homebuyers struggle with the decision of buying a condo versus a house. What are some things to consider when deciding between both housing types?

A condo is a very different purchase, obviously. A condo is a lifestyle. Typically you are in amongst many people, you’ve got workout facilities or shared accommodations, but you also have condo fees, which can get out of control. A condo is a great starter. They’re typically a fantastic price point. Be aware if it’s pre-construction you’re getting into. The difference between possession date and ownership date. There’s a cost in there – phantom rent to the condo corporation. There are all sorts of other elements to be aware of with a condo. But a house as well can have large maintenance costs. Be realistic with the work that needs to be done. Run a proper budget. Typically I say a condo is a good first step, a house is a good second step.

5. Although you may not be able to get everything on your wish list, what are some key features to look for when buying a home?

Make sure it’s in your budget. Try to pick a location you feel comfortable living in. The worst thing is moving in and having to move again. Moving is expensive; a lot of fees with buying and selling. Look at the long-term rental potential of the property as well. I always say look for the necessities first. If you need a place with an income suite, find a place with an income suite. If you need to be close to school or work, find a place that’s in that area. Also be aware of the things that are on your wish list you can add to any home like a garden or a gas fireplace. There are ways of manipulating or renovating your home into your dream home. You’re not always going to get everything right off the bat.

6. What advice can you offer for people looking to pay down their mortgage faster?

Definitely explore the different type of mortgage products that are available. Some actually help you pay down your mortgage faster if you’re clever with them. There are some cash-back mortgages that people think, “oh great, I’m going to get a mortgage and get cash back!” If you want to pay down your mortgage faster, you can actually use the cash as a lump sum payment that pays of a huge portion of your principal balance and at the end of five years, you’re actually better off than if you went with a standard mortgage. You can double up on payments, you can do lump sum payments, you can go to biweekly payments; there are all kinds of things you can do to speed it up. The sooner you do those, the faster they actually pay down your mortgage because such a large portion at the beginning is interest.

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.