Barbara Stewart, CFA is a portfolio manager, researcher, and writer on issues surrounding women in finance. In her 2013 Rich Thinking research she interviewed over 100 accomplished women from around the world to find out how they invest their money and discovered that these women spent 50 to 80 per cent of their money on real estate.
Since Toronto is one of the most multicultural cities in the world and the fourth most populated city in North America boasts the same global trend of women looking to invest in local real estate. With this increase in independent female buyers comes a new, diverse demographic ranging from young, single home seekers who either still live with their families or no longer want to rent, to others who are in need of a new home following the end of a long term relationship or marriage. Despite their differences, these women are buyers with specific and unique needs beyond what real estate has ever seen before. Anyone can benefit from lessons learned from the wisdom of other smart, savvy, women, who have successfully navigated the Toronto real estate market.
Single in "the six"
1. Hire experts that you are comfortable working with
Chances are, in a competitive market like Toronto, you will be spending a lot of time with your real estate agent, so it makes sense to hire someone you like. You want to ensure you hire someone you are both confident and comfortable working with, as you’ll be relying on them during one of the most important financial decisions of your life. Odette, who purchased her boutique condo in Roncesvalles in 2013, said:
"Early on I chose to work with a female broker who made connections for me with the financial end of things. I used the people she trusted, because had I not, I felt like I might be treated differently as a single female. I just wanted to avoid that experience altogether."
2. Save up for as big a down payment as possible
Single people are at higher risk to default on their mortgage. They don’t have a partner to rely on should they lose their job, maintain an injury that impacts their earning potential, or incur other significant unplanned expenses. Simmer Principio, Mortgage Agent, Mortgage Architects advises clients to:
"Save up as much as you can towards your down payment. Single purchasers should be aiming for a down payment closer to 20 percent than the minimal five percent because they are going to be tackling the mortgage on their own. By putting enough money down women can avoid the expense of the CMHC Mortgage Loan insurance premium and use that money towards an emergency fund."
3. Set up a reserve or emergency fund
If you are looking on your own (or with someone), you’re going to want to have a healthy emergency fund whether it’s covering unexpected costs for your new home like repairs and maintenance, or other major purchases surrounding your transportation, or keeping yourself in good credit standing should you lose your job. Many financial experts recommend three to six months of expenses saved as an emergency savings goal, but even a few thousand dollars to start with, that you add to every month, can help a lot and help prevent you from incurring debt when a big expense suddenly hits.
4. Be flexible with your wants and your needs list
Single home seeker Vanessa, who purchased her loft in Leslieville in 2013, said:
"In a competitive market, the constant challenge was to explore properties that met my needs and as many of my ‘wants’ as possible, all within my budget".
By working closely with your agent you can determine what items are ‘must haves’ compared with ‘nice to haves’ to make sure that the most important items on your list are covered. Revisit your list from time to time during the process to revaluate.
5. Be realistic with your budget
One of the biggest challenges Ashley, who purchased a townhouse in Swansea in 2015, faced was coming to terms with setting a realistic budget in the expensive Toronto market. She, realized that there is no magic money fairy to increase your purchasing limit.
"Whatever I wanted to buy, I had to be prepared to do all on my own. Of course you have help and a sounding board from your friends and family, but ultimately the decision to put an offer in is yours, which is both scary and wonderful."
If you aren’t sure how to put together a budget on your own that you can realistically live on, Simmer Principio advises to make an appointment to talk to professionals who can help you:
"Talk to a financial planner or mortgage broker/agent to ensure you are going to be living within your means, even if you hit a financial bump in the road."
Principio noted that clients who are well prepared with a realistic budget, and a pre-approved mortgage are better able to remove some of the emotional stress from the buying process.
6. Don’t be afraid to ask questions
Asking a lot of questions can lie outside a lot of anyone’s comfort zone, but it is important to fully understand the purchase you are making in terms of how the numbers will impact your budget and lifestyle. Odette explained:
"As a single woman, I felt a bit intimidated asking questions. I also felt like I should 'know more' about this process. After asking people a lot of questions, I started to get the gist of things... having a lawyer, closing costs, clauses, amendments, pre-approvals, occupancy etc."
When comparing her experiences to what she envisioned the process to be like for single men she said:
"Some single men have more confidence and take greater risks. Typically there are more men in the STEM fields (science, technology, engineering, and math), which means more exposure to numbers and that's a lot of what buying a home is: economics and math. There seems to be an innate sense of ‘this is just another step and I am confident’ with some men."
7. Educate yourself in finance news, real estate and your own finances
This is really an extension of asking questions, but is required to make an informed decision on your financial future. Knowledge about your credit score and mortgage pre-approval as well as keeping abreast of trends in the real estate and financial markets will help you make better decisions. Whether you talk to friends who have already purchased a home, follow related blogs and websites, connect with financial professionals for advice and support, or a combination of the above, you will be better suited to make the best possible decision for you and your budget. Principio recommends:
"Keep track of what your expenses are while you’re saving your down payment. Make sure that you have a solid credit score, and are paying bills on time so you can get approved for a mortgage when you need it, all while building good habits that will help you as a home owner."
8. Have a strong support network
Evidence in Barbara Stewart’s Rich Thinking research has found that
"Women are more interested in learning about financial matters by reading or listening to real stories from real people. They then share those lessons with the next generation or friends."
These women rely on a strong support network to help them make important financial decisions, such as buying a house. This type of support network was important to all of the recent home buyers interviewed. Odette said about her experience:
"I relied on a number of people when making my purchase. My aunt believed in me as a buyer, and that helped boost my confidence. A friend of mine told me about buying a home with another couple, and my brother told me about two brothers and a sister who bought together to get a foot in the door, so they all supported me in this decision of purchasing. I still rely on those three people."
9. Consider adding other trends in "pink" real estate to your own want list
Trends in "pink" real estate can include, lower-maintenance properties, such as condos with underground parking and concierge desks, particularly if they’re juggling needs of a career, travel, and children. Safety is also a significant concern among single women buying on their own. Ashley felt that one of the best pieces of advice she received when looking for her property had to do with assessing safety and comfort in her new neighbourhood.
"I was told to walk around the neighbourhood and get a feel for it at different times. As a single woman you want to feel safe walking home alone after dark, so knowing the neighbourhood is necessary."
10. Don’t dismiss the merit of Toronto condos
While it is important to see your real estate as an investment, you need to remember that it’s also where you’re going to live and purchasing a place where you’ll be happy to live for the foreseeable future is critical. Odette says:
"The worst piece of advice I received during this process was ‘Don't buy a condo.’ And then, ‘Don't buy a condo in Toronto.’ The condo was for me to live in, not a rental property, so if I live in Toronto, where do you expect me to buy? Toronto! I am aware that there are some condos that have been slow to go up (in value), but that was not the case with what, and where I was purchasing so I just felt like, if people didn't have anything supportive to say, then they needed to keep quiet."
Remember this property is for you to live in. No one has a crystal ball on resale, so focus on your housing needs first.
11. Do what’s right for you
Leading up to her purchase, Vanessa kept on hearing and reading about, "the looming burst of the real estate bubble" and had many people suggest that she hold off until the market cooled off. By purchasing her real estate as the place she wanted to live, and following her own advice, she did what worked best for her. Three years later she is still happy with her choice. By educating yourself, going with your gut, and a thorough financial plan, you set yourself up for your investment to become your home, which is very valuable.
12. Follow your brain, not just your heart, when it comes to future cohabitating
While many people begin their real estate ventures while single, life can change, and personal relationships can often lead to cohabitation. Vanessa told us of people who are looking to move in with a partner:
"I think fully understanding the implications of moving into a committed relationship on your real estate/investment is important. How does being common law or married impact your investment right now? What could the impact be if your relationship status changes in the future? What conversations should you have with your partner to ensure there is a common understanding of your shared investment goals?"
These aren’t romantic discussions, but they are important ones. Odette told us her view:
"There may be a point where you decide that since both parties are coming into a relationship with property, maybe it's best to keep it separate and use the equity to make a purchase together, or if only one of you has property, I can't stress enough that you need to be very confident that you are aware of the decisions you are making in giving this other person a stake in your investment(s)."
No one wants to think about the worst case scenario, but an awkward conversation and possibly drawing up some simple paperwork can save a lot of financial headaches and protect both parties’ investments down the road.