I got off the phone with a client, first time home buyers, who are frustrated. A little bit of background. They have $45,000 in savings as a down payment. They're first time buyers, and they want to buy a house. Now, when I say house, they're looking to buy a freehold, so a semi-detached or a detached.

The problem is, as you know, in Toronto things are not very affordable, and to get into that semi-detached or detached, you're looking at probably $800,000 or a million, and it probably needs quite a bit of work. So I told them, "There's a plan. We’ve got to take it step-by-step."

In this case, based on $45,000, so if we work backwards from the government down payment requirement, it's 5% on the first $500,000, and then 10% for the portion that is above the $500,000. So it works out to be approximately 7.5% is the minimum down payment, depending income, credit, and qualification.

What I told them is, "Let's put the 7.5%," so with a $45,000 down payment, that works out to approximately $600,000 purchase, so $600,000 will put them in a condo. Now, they did not want a condo, but I said, "Let's put a plan. So you get into the condo market, you put your 45 Gs."

Here's the beauty of real estate. Over five years with mortgage paid down, so no accelerated payments, no lump sums, just monthly regular mortgage payments and 4% appreciation on an annual basis, which is pretty conservative in the Toronto real estate market, in five years time frame, their equity position would double, so that $45,000 becomes $90,000.

Hopefully in five years their income is higher, they have higher positions at their companies, they have more savings built up, so that $90,000 could become more. That will set them into their next step, which is getting into a semi-detached, or a detached, or whatever they qualify at that time.

The one tip that I have is to make things affordable in Toronto is if you're buying a semi-detached or a detached, consider having an income or in-law suite where you have rental income. So I'll give you an example.

The one bedroom basement in the areas that I've been showing my clients, they rent from $1,300 to $1,500 a month. Now, every $500 of rental income covers $100,000 mortgage, so $1,300, that's approximately $250,000, so getting a $1,500 rental income, or $1,300, would cover anywhere from $200,000 to $225,000 of your mortgage.