Wednesday, 5 February 2014

The Spillover Effect: How To House Hunt Better

People trust their guts. And for the most part, guts tell people the right things to keep them out of trouble or intuitively lead them to the right decision.

When it comes to buying real estate, it's not always wise to trust your guts - at least not all the time. For example, guts can fall hard for a house that is staged well. They love a dream kitchen, beautiful lighting, edgy, yet tasteful art, and a backyard spilling over with colourful flowers, carefully placed shrubs and and a puppy sleeping by some garden gnomes. 

Guts can also really fall for a neighbourhood. With certain clients, if I drive through an established or some emerging areas with the right buzz on the nearby commercial strip, their guts start responding to the right mix of indie coffee shops, yoga studios and hip restaurants.  An appealing neighbourhood could set off the dream to want to live here. Clients imagine walking down the streets. They time how long it would take to drive to work or walk to the transit stop. They get hooked. 

Some neighbourhoods just sell themselves.  In Toronto, people's guts love Roncesvalles, Little Italy, Cabbagetown, and more recently the Junction, Leslieville and Wychwood. 

If  you can afford to buy in these neighbourhoods, then go to town. They're great! In fact I live in one of them and am quite happy here.  Competition is currently stiff for a great house in a great neighbourhood. If those are the kind of homes you like, then there's a good chance a lot of others will as well. So, there will be a lot of offers and you'll have to have the best one.   If you're the kind of buyer who is on your second home after building a lot of equity in your first house, then you will likely have the deeper pockets to live in some of the great hoods listed above. If you have the sizeable down payment and you can do it! Get in there.

If you are on your first place or are moving to Toronto from a place that is less expensive, you are going to have to look at things differently. If the numbers just don't add up for you to live in a great house in a great neighbourhood, you'll need to dial down the guts and  put on some potential goggles instead. 

Don't give up on your guts all together. At the start of your search, they can be quite helpful.  So, let your guts lead you to the neighbourhood you want to live in. Maybe it's the Annex or maybe it's High Park. Then ask your brain if you can afford it. If not, look at the neighbourhood right next to it. Because, chances are, the people who cannot get into the richer neighbourhood will live next to it, and these emerging neighbourhood transform fairly fast. 

Let me give you a few examples. Let's say you like the Annex. You want to live there. But it's your first house and you can't quite cover it. So, you go a little north to Wychwood. Ten years ago, Wychwood was actually quite a reasonable neighbourhood to look for some first-time buyers, but these days, this neighbourhood has developed a remarkable community with the Wychwood Barns as a centre piece plus better businesses have popped up along St. Clair. So, if you can't afford Wychwood, go north of St. Clair to Oakwood, and you have the same beautiful homes without the same level of reno. Already, I am seeing the desire to live here going up. Next it will be north of Rogers Road. Any way you slice it, it would be a good investment to be in the next spillover neighbourhood.

Now let's do one in the east. Homeowners love Riverdale. And if you can afford to live there, I suspect you will be very happy. Great location. Transit is a dream, and the Danforth has everything you need. If you can't quite deal with the typical million plus price tag, then you move over to the Danforth Village just west of it. The homes are much more humble here, for the most part, but the prices are better. The thing is, this neighbourhood is now becoming the terrain of bidding wars for many first-time buyers. So, then skip to the next one if you cannot afford it. I would suggest going over the Victoria Park border and into Scarborough. Yes, I said it. Scarborough. It's undervalued and you can get a lot more home there than even the Danforth Village, and with less money.  As each neighbourhood grows in value, it helps out the one next to it. 

To be clear, I'm not suggesting you move to a horrible neighbourhood and wait for it to turn around. That's a bad strategy. I'm also not saying that all neighbourhoods next door to great ones will be good investments.  You do need a real estate salesperson who understands the city to help out here. 
For those first time buyers or those looking for more house for less money, you have to cross the metaphoric tracks. You need to look at the neighbourhood beside the crazy bidding wars. Because once those bidders in those crazy bidding wars become exhausted or tired of competing, they are going to look nearby. And over enough time, that will be the new place for bidding wars and rapidly rising prices. Hopefully, after you have purchased there.

Of course, if you have to live in a walkable neighbourhood near good transit, your gym, your favourite eatery and cafe, then you have plenty of condo options.  In many great neighbourhoods, some condos are more affordable. With condos, you really need to do your homework on a given building too. If it's a house you really want, just make sure your guts are not the only thing calling the shots. 

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