This is a fun post for me. I will document how I bought my personal home. I have been reading blog posts dealing with issues of the Doctor House. This was my journey.
- House 1- The old house my husband bought before we married.
- House 2- A duplex purchased with my parents.
- House 3- Our current multiplex.
Shortly before we married, my dear husband had the grand idea of buying an old house on a large plot of land. It was only liveable on one level with one bathroom. It was not till much later that I learned his real plan was to build a large new house on the lot. Unfortunately for him, he could barely afford the land with just the old house on it. I recall vividly thinking to myself “no biggie, he’s a doctor for Pete’s sake, he can take care of it.”
Note to dum dum younger self. If you marry someone, you marry their debt. Don’t delude yourself.
I always had plans to help my parents buy closer into the city. They lived about an hour away at the time. They only had half the payment for a good home in town. I had planned to foot the other half.
Well things did not go well for my husband with that house. It was a money pit and we had to hold it for about 7 years. Thankfully we rented it out and let the renters carry the costs.
This delayed my ability to buy into my half of a house with my parents. But ten years after med school graduation, I paid cash for my half of the duplex. You heard it correctly, I paid cash for my first home.
When I finally helped my husband sell the old house, I found the lovely multiplex we currently live in. It was in a much nicer neighbourhood. We could not really afford to live there at the time. But I told him to put the down payment and we rented out the multiplex for about a decade.
Our living expenses were very low while living in the duplex and it was effortless to save. That is what happens when one of the largest expenses is nixed. We were able to save enough to pay off the urban multiplex after about a decade.
Certain things stand out for me. Renting the multiplex out for ten years allowed the use of OPM and OPT. That is OPM other people’s money (the bank) and OPT other people’s time.(the renters). I have NEVER bought too big a house. It had to do with buying in high cost of living areas but also due to the fact I dislike the hassle of more room than I needed.
I like being efficient and I realized that the most expensive part of real estate was the cost of the land. Thus I focused on real estate in great locations and the house was more an afterthought. I rarely got distracted by a fancy house. I always saw new homes for their depreciating aspect. I steer clear away from fancy condominiums since I valued the land and the optionality I would have with owning my own piece.
There is an explosion of tiny house living and laneway/ coach houses. I see a prosperous future of multigenerational living in a good location. My sharing values run deep. I will gladly share the land with my aging parents and my growing children. If I was ever to rebuild my older home, it would be guided by the needs of my evolving family rather than the dictums of “house porn”.
I view my home mainly as a consumptive item versus an investment in the truest sense of the definition. Investments pay me cash, not the other way around. Canadian real estate has enjoyed a bull market the past decade. But a home is something that one keeps paying money into even when it is paid off.
However, there is more to life than cash flow and thus I try to use my assets to do more than improve my bottom line.
I primarily use my home for consumption smoothing. It helps everyone live within their means a little easier. And I don’t have an issue with debt. But I use debt as a tool. Just don’t use the tool AGAINST yourself.
We still have the original half duplex with my parents. We use it mainly for friends and family to stay in when they visit for longer periods. My kids have expressed plans that one of them will move back to live in that unit when my parents become too old to live independently. Their thinking is that their grandparents were always around helping when they were younger. So why would they not do the same for them when they need it?
Think long and hard when it comes to real estate. Like think really long term. Real estate has ginormous closing costs. The realtor fees, transfer taxes, lawyer fees to name just a few. Real estate transactions have a litany of middle men involved. My multiplex will make up my Personal residence exemption and will be passed on tax free to one of my children. And they already know the plan.
And what would I recommend to a young professional? Do NOT buy a house too early. When you are young, your human capital is the highest. Who wants an albatross around the neck tying you to a specific area?
That was how I saved us with that house my husband bought which was too expensive. I rented it out to tenants once I saw the numbers. Then we rented a much smaller and cheaper place closer to our work. We also did not have yard work or house maintenance to deal with. Score! Instead, we worked lots, played lots and saved lots. And I would never have wanted to do it any other way.