How do home buyers position themselves in this crazy real estate market?

I'm going to share a real story. I have these first time buyers whose budget is $900k, just under $900k. Initially I think, great, first time buyer is 900 grand. That's a fantastic opportunity to get into the two bedroom condo space in the downtown core. But these guys really wanted to challenge me and they said, you know what we don't want a condo. We want to buy a house and find a place that can have rental income to subsidize our cost of living.

We looked at a bunch of houses and some of the houses we looked at were beautifully staged. They showed well and I told them let's just forget about it. Let's not look at these houses or I should say compete for these homes because they will generate a lot of competition, a lot of multiple offers. There's one house it generated 30 offers. Yeah, it's true. 30 offers on offer night, which is absolutely insane!!

What we decided to focus on is, stay just outside the hot zone. If you think of real estate, think of a ripple effect. If you've got a really hot zone, just go outside of that. In this specific case, we looked at areas just outside those 15, 20, 30 offers, but we wanted to stay close to the Eglinton LRT for future potential appreciation. It's a good place to attract tenants who want to access transit down the line. We managed to find a bungalow with a rental basement under $900,000 that will generate $1,400 to $1,500 a month. Now, that is equivalent for that rental income to offset $300,000 mortgage payments. On a $900,000, they're technically buying it for $600k because the $1400-$1500 will carry the $300,000.

These guys are smart buyers because they're buying their first home, which has two units. They're going to live in the main unit, on the main floor and rent the basement. I told them the plan is, and I did this exactly the same thing back when I bought our first home back in 2003: use your home as a forced savings plan. Over the next five years, take every dollar that you could pay down that mortgage, build your equity, let the house appreciate because you're going to be close to transit, which should be complete we hope in late 2022. And then in five years time for them, let's look at the house, pull some equity out of it. Keep it as an investment property for their longterm retirement, I call it the pension plan investment and then pull that equity and buy your move up home in the Toronto's real estate market.

If you're a frustrated buyer and you don't want to lose out and compete against 20, 30 offers, feel free to reach out. I'd be more than happy to help and share my insights with you.

Until next time, happy investing.