Firstly and most importantly, the number one step is to figure out the BIG WHY you want to buy real estate. It can be for various reasons such as wanting to invest for cash flow or it can be just to put a roof over your head. Whatever the reason, you need to be clear as to why you want to buy now and what your intentions are for the short and long term future. After a lot of thought, I've come up with the BIG WHY I want to buy a house:

• I am renting - yes, you heard right! I am a Real Estate Agent and I am RENTING! I've mentioned it a number of times before and if you are a client of mine, I'm sure I've told you that buying is not always the financially best thing to do. Why you ask? Let me count some ways...
  
  
  1. the cost of making the wrong buying decision (i.e. a property that is too small or in a location you end up not liking) is a lot more than the cost of a wrong rental choice
  2. it almost always costs more to live in a place that you own vs. rent (especially if you don't get any tax benefits), so what's wrong with having the landlord subsidize your living expenses? Renting is technically a way for you to live beyond your means (i.e. renting a high floor lake facing 1 bedroom + den condo for $1,700 but costs around $330,000 buy which would take well over $2,000 to carry with mortgage, maintenance fees and property taxes with a modest down payment.)
  3. renting is more carefree and maintenance free - if something major breaks, it's usually the landlord's responsibility to fix it and foot the bill
  Anyway, hopefully I haven't convinced you into renting because that wasn't my intention - I'm just pointing out that depending on the situation, it's not all that bad to rent. Owning is better of course, but don't rule out renting as an option. Oh and for the record, I do own a rental property (a condo) right now, so it makes renting a little easier to swallow for me since I'm paying someone else's mortgage, but at least someone else is also paying mine!

• It Makes Financial Sense - regardless of how the market is doing, if I buy the right property at the right price for me, then it makes sense for me - obviously, the most house I can get with the least money the better! With the combination of my down payment, potential rental income and subsequent monthly obligations, in the best case, I would like to break even (which would equal the same monthly outflow as what I am paying in rent right now) and in the worst case scenario, I am comfortable with supporting no more than a $200 negative cashflow if I choose not to live there and rent the entire house out. Thus, even if the market were to tumble and house prices fall, I will be able to ride out market fluctuations and not be pressured to sell because I am in a financial crisis.

• Investment Potential - in most cases, the potential for a house to appreciate is higher than for condos. With condos, there are more factors that can potentially bound the limit of appreciation such as the sales of other units, the condition of the building, the management and operations of the condo board, the facilities, amenities and maintenance costs.  You are also limited in what you can improve in a condo.  For example, you can't make a balcony or a deck if you don't already have one whereas in a house, you can typically do so with the right permits and if you have the money.  However, the biggest beauty of a house is the possibility of multiple units, which is of paramount importance for me to even make this purchase possible. I'm going to need to have rental income from at least a basement apartment and hopefully not, but a roommate if I get pushed beyond my comfort zone.  Having two or more rentable units in one dwelling is a fabulous investment opportunity.

• Tax Benefits of a Principle Residence and The Ability to Leverage- these are the two things that people don't take into consideration or appreciate enough. Tax-wise, when you experience a capital gain on your principal residence when you sell, the gains are exempt from taxes! That's absolutely marvellous and a great way to create wealth while sheltering your equity gains from the tax man. It might be a little harder to get capital gains in this bearish real estate market, but in the long term, real estate is typically one of the best investment vehicles... partly because of a second great benefit - the ability to leverage. I'll have to devote an entire blog towards using your property to leverage, creating down payments for additional properties and making your mortgage interest tax deductable. For now, the long story short is that borrowing money secured against a home (a.k.a. mortgage or home equity line) is one of the most inexpensive ways to borrow funds. The interest rates are typically low compared to a regular bank loan and the principal is amortized over a long period of time (25 years) keeping the payments lower. So yeah, I totally want to take advantage of these two benefits!

• I am Ready - after living in condos for years and never really setting foot in any of the amenities and then experiencing ground floor living (i.e. not having to take an elevator to get home), I have decided that I don't want to take an elevator anymore - hence, the next logical step to a freehold property. I'm not going to lie - I'm going to miss underground parking. I'm also not looking forward to shovelling snow or cutting grass, but I can pay for that right? I'm paying for it in a condo anyway...

There you have it, my BIG WHY.  Now if I can only a find a place...