{"id":23885,"date":"2024-05-13T11:11:00","date_gmt":"2024-05-13T18:11:00","guid":{"rendered":"https:\/\/www.roryc.ca\/blog\/?p=23885"},"modified":"2024-05-07T10:23:54","modified_gmt":"2024-05-07T17:23:54","slug":"high-rents-stagnant-income-make-planning-for-a-home-purchase-more-challenging","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2024\/05\/high-rents-stagnant-income-make-planning-for-a-home-purchase-more-challenging\/","title":{"rendered":"High Rents &amp; Stagnant Income Make Planning for A Home Purchase More Challenging"},"content":{"rendered":"<p style=\"text-align: justify;\">Despite the $3,000 rent on his two-bedroom condo, Zakary Wexler has a plan. The 29-year-old financial advisor with WEALTHinsurance.com in Vaughan, Ont. and his wife are setting aside several hundred dollars a month toward a down payment on an investment property they plan to rent out.<\/p>\n<p style=\"text-align: justify;\">\u201cI would like to have $80,000 to $100,000 down and, so far, we\u2019re on track for that,\u201d he says, adding that they plan to buy in 6 to 10 years. \u201cRenting was always part of the plan \u2013 it\u2019s working out for us.\u201d<\/p>\n<p style=\"text-align: justify;\">While Mr. Wexler is focused on obtaining passive income from an investment property right now, he and his wife would also like to buy a home of their own down the road.<\/p>\n<p style=\"text-align: justify;\">With sky-high rents in cities across Canada, many Canadians are struggling to find ways to save enough for a home \u2013 or abandoning the dream of home ownership entirely. Some young people are borrowing from family members for down payments, while others are turning to advisors for financial strategies on how to save enough and hoping house prices plateau.<\/p>\n<p style=\"text-align: justify;\">Jim Pan, a fee-only, advice-only certified financial planner with Panorama Advisory Group in Vancouver, works with many clients in this situation. He looks at how a client plans to use the property, how much debt they can handle, their long-term cash flow and what direction interest rates are going. Then, he takes a hard look at their lifestyles.<\/p>\n<p style=\"text-align: justify;\">\u201cIt all comes down to lifestyle changes,\u201d he says. \u201cIs there something we can adjust?\u201d<\/p>\n<p style=\"text-align: justify;\"><strong>Renters Feel The Pinch<\/strong><\/p>\n<p style=\"text-align: justify;\">The average rent in Canada was $2,181 in April, according to Rentals.ca. In North Vancouver, the most expensive region in the country, the average for a one-bedroom apartment was $2,704.<\/p>\n<p style=\"text-align: justify;\">Those rents are taking a big chunk out of the savings of would-be homebuyers at a time when they need higher incomes to qualify for mortgages.<\/p>\n<p style=\"text-align: justify;\">According to a Royal Bank of Canada (RBC) report released last month, renters spent almost 9% more than they earned in household disposable income last year, while homeowners saved 7% of their take-home pay.<\/p>\n<p style=\"text-align: justify;\">\u201cLower earnings and higher allocations to housing make it exceptionally difficult for renters to save for a down payment \u2013 a crucial step in the path to wealth accumulation,\u201d the RBC report states.<\/p>\n<p style=\"text-align: justify;\">As a result, only 45% of households could afford to buy a condo in 2023 based on their income \u2013 down from almost 60% in 2019 \u2013 and only 26% could afford a single-family home, according to the RBC report.<\/p>\n<p style=\"text-align: justify;\">That reality has led some to rethink their dream. In cases in which a person\u2019s income is insufficient and will lead to an underfunded retirement, \u201cowning a home shouldn\u2019t be the ultimate goal,\u201d Mr. Wexler says.<\/p>\n<p style=\"text-align: justify;\">Mr. Pan, for his part, says he \u201cwould make amassing wealth the primary goal.\u201d And while a home can build wealth, \u201cthe purpose of an asset is to provide passive income, whether it\u2019s from rental properties or liquid investments.\u201d Holding equities for the long term can often outpace growth in real estate, he adds.<\/p>\n<p style=\"text-align: justify;\"><strong>Discipline, Patience and Creativity<\/strong><\/p>\n<p style=\"text-align: justify;\">For those still intent on buying, advisors are walking their clients through several funding options.<\/p>\n<p style=\"text-align: justify;\">Mr. Pan says if someone can\u2019t save fast enough, they should consider a part-time job to augment their income \u2013 the proceeds of which can be invested in a high-interest savings account (HISA) or guaranteed investment certificate (GIC).<\/p>\n<p style=\"text-align: justify;\">\u201cA GIC or HISA makes a lot of sense right now as you can get between 4% and 5.7% in interest,\u201d he says.<\/p>\n<p style=\"text-align: justify;\">Mr. Wexler says he advises his clients to ensure they don\u2019t park their savings in vehicles that are too aggressive \u2013 even in scenarios in which they plan on buying in 10 to 15 years. \u201cDon\u2019t chase unicorns,\u201d he advises.<\/p>\n<p style=\"text-align: justify;\">He\u2019s shifted his equity holdings into passive exchange-traded funds, with a small amount in actively managed funds that have fees of less than 1.5%. He is also using a tax-free first home savings account.<\/p>\n<p style=\"text-align: justify;\">Some clients may have to adjust their lifestyles, Mr. Pan says, beginning with meal-delivery services.<\/p>\n<p style=\"text-align: justify;\">\u201cIt\u2019s very dangerous,\u201d he says. \u201cI tell my clients, \u2018Meal prep more.\u2019\u201d He says by cooking at home, a couple can save $300 to $400 a month easily.<\/p>\n<p style=\"text-align: justify;\">For Mr. Wexler, the big change was in mindset. The couple pays off all debt from credit cards and student loans each month, has stopped \u201cimmediate gratification\u201d expenses, has cancelled many of its streaming services and now uses credit cards and insurance products that have lavish reward programs.<\/p>\n<p style=\"text-align: justify;\">\u201cIn 2024, we probably saved $3,500 on things we would have formerly spent on,\u201d he says. \u201cIt\u2019s all about safer, calculated decisions.\u201d<\/p>\n<p style=\"text-align: justify;\">Elke Rubach, a certified financial planner and founder of Rubach Wealth Holistic Family Advisors in Toronto, says many renters should take heart in the fact their salaries will likely increase over time, with lifestyle adjustments helping to augment their savings.<\/p>\n<p style=\"text-align: justify;\">\u201cPeople need to see real estate as a long-term, patient investment,\u201d she says.<\/p>\n<p style=\"text-align: justify;\">Would-be buyers should also be open to alternative arrangements when they buy a home. While some of her clients head to the Bank of Mom and Dad, others are being innovative, finding roommates to share the rent and investing what they save in rent for a future down payment.<\/p>\n<p style=\"text-align: justify;\">Others are planning to purchase properties jointly, sharing mortgage payments, maintenance fees and taxes.<\/p>\n<p style=\"text-align: justify;\">Ms. Rubach says one client recently co-purchased a home, with a couple living on the main floor, the other in the basement and the top floor rented out.<\/p>\n<p style=\"text-align: justify;\">\u201cIt\u2019s all about discipline and patience,\u201d Ms. Rubach says. \u201cIt\u2019s going to take years \u2013 and it\u2019s a good idea to be creative.\u201d<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.biv.com\/news\/real-estate\/what-young-people-can-do-when-homeownership-seems-out-of-reach-8709044\" target=\"_blank\" rel=\"noopener\">What Young People Can Do When Homeownership Seems Out of Reach<\/a> by Anna Sharratt | The Globe and Mail | BIV<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Despite the $3,000 rent on his two-bedroom condo, Zakary Wexler has a plan. The 29-year-old financial advisor with WEALTHinsurance.com in Vaughan, Ont. and his wife are setting aside several hundred &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2024\/05\/high-rents-stagnant-income-make-planning-for-a-home-purchase-more-challenging\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26,9,13],"tags":[],"class_list":["post-23885","post","type-post","status-publish","format-standard","hentry","category-homeselling-homebuying","category-mortgage","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>High Rents &amp; Stagnant Income Make Planning for A Home Purchase More Challenging &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2024\/05\/high-rents-stagnant-income-make-planning-for-a-home-purchase-more-challenging\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"High Rents &amp; Stagnant Income Make Planning for A Home Purchase More Challenging &#8226; Rory C Real Estate | Oakwyn Realty\" \/>\n<meta name=\"twitter:description\" content=\"Despite the $3,000 rent on his two-bedroom condo, Zakary Wexler has a plan. 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