To do or not to do... First time buyer!

[Cory S.]

Hey everyone,

Right now, I am feeling very thankful to have bigger pockets to go to for advice! Thank you in advance for your replies! I am hoping to write an offer today if I choose to go ahead with this purchase.

I am looking to buy my first home. This home seems great ($500-600/month in my pocket and I believe good resale value), but I'm really afraid the market crashing due to oil prices and how that affects the economy here in Canada. The vacancy rates should continue to go up because people are leaving to go back home to places like Ontario - I'm looking to buy in the oil run province of Alberta. Many of you are probably thinking that since I will live here and it is a long term investment, that I should not worry about the market. Unfortunately, I am a young, single woman without a lot of savings who fears for my own job security in these downtimes as well. I work in middle management in the construction industry, so if new construction is widely affected my job may be affected as well (I had an executive tell me that people who aren’t involved in day to day operations are usually the first to go in hard times – I run our change management initiatives, which are a focus when a company has money to invest and is looking to grow!

My question is twofold…

1)Am I right to think that this property is a good buy? And is it a good choice for a first time, single homebuyer or is the risk too much? Are there better options for me?

2)Should I hold off and see where prices go in the next year? There will always be more houses like this right…? If I did this, I would probably buy gold for now – which I believe goes up as the economy goes down in general? Although… if the economy goes up, I may lose money and my change to enter the real estate market!

Property info:

-Neighbourhood is safe, family oriented, homes build in 80’s but many on the street have new siding and fantastic curb appeal (the one I am looking at has older siding but still nice curb appeal), bright and very wide street unlike most in the areas I can afford in

-Three bedrooms 1 bathroom upstairs (bi-level), newer kitchen, good condition overall, 1 bedroom suite in the basement with separate entrance, storage, large bright windows and high ceilings, good condition – ready to go minus framing in and adding one door (easy fix). Huge yard, paved driveway, no garage (most comparables have down detached).

-Purchase price $330,000 (fair price)

-Upgraded comparables with garages are listed around $350,000-$360,000 (may not have bsmt kitchen)

-Not-upgraded comparables with garages, without bsmt kitchen listed around $310,000-330,000

-Mortgage, taxes, utilities, CMHC approx. @2000-2200/month (lets go with 2200)

-Basement rent $900-1000

-My share = $1200-1300 (I currently pay $1800 for rent so this saves me $500-600/month)

-Needs new hot water tank and furnace. Shingles look good and good condition elsewhere.

-Little work to be done (I am not handy), move in and start bsmt renting right away!

It may not be a heck of a deal, but I save $500-600 per month vs. renting my parents condo.

Key concerns:

-Prices to go down in the near future?

-Rent to do down in the near future?

-Laid off from my job and cannot afford payments. Could easily get a job making $500-600 less/month then I do now, so at least would be break even on the property with a tenant downstairs for what rents are now.

-Interest rates double or triple in the coming years and I cannot afford the payments

***Interest rates go up in an up economy though right, so points 1-3 are one scenario and point 4 would be an alternate scenario right?

Are these risks risks I am just going to have to bone up and take if I want to become an investor, or are there better options for me? I was raised not to take risk, but I don’t feel that is the way to get ahead. I am having a difficult time determining how much risk I need to take to start moving ahead.