You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.
ROMA: Buying a home with a partner is hard enough, but a growing number of Canadians aren’t waiting for love or marriage before they jump into real estate.
ROB: Solo buyers need to save thousands for a down payment and qualify to borrow the rest with one salary. And that’s just the beginning. They also have to pay their mortgage, property taxes, insurance and cover maintenance costs. All of this without the cushion of another income in case of unemployment or illness.
ROMA: Welcome to Stress Test, a personal finance podcast for Millennials and Gen Z. I’m Roma Luciw, personal finance editor at The Globe and Mail.
ROB: And I’m Rob Carrick, personal finance columnist at The Globe. About 20% of homes sold in Canada are purchased by solo buyers. Single-person households are the fastest-growing type of household in the country, according to census data. Still, it can be surprising to see people make such a huge investment given the rising price of real estate. How do people in their 20s and 30s pull it off?
ROMA: We spoke with three people about how they managed to do it. They have good incomes. They hustled. They made sacrifices to even live with their parents until their late 20s. It’s possible, but it’s not easy. Their stories are up after the break.
SARAH: So my name is Sarah. I am 33 and I live in Winnipeg, Manitoba.
ROMA: Sarah runs her own digital marketing business and almost bought a place with her boyfriend in her late 20s. Then they broke up. Still, she always wanted to buy a home.
SARAH: I would like to think that it was because I viewed it strictly as a financial asset for my long-term financial health. But I think that if I’m being honest with myself, I think a big part of it was just seeing a lot of my friends [who] are in pretty good financial situations, and I had friends buying homes well before I was, and many of them were doing it with their partners. And I just felt like I was behind them. I think a lot of people fall into that, and I definitely do where I look at others and I think, I don’t have everything that they have. I want that. So a house was one of them. And I personally didn’t feel like I was successful if I didn’t have a home. I don’t think that’s the case for anybody. I don’t look at other people that way at all. But for myself, that’s how I viewed it.
ROMA: Sarah’s annual income is in the low six figures. Her budget with her ex was around $600,000. Alone, she could only qualify to borrow $320,000.
SARAH: I felt very deflated. My max at the time was like $320K. So yeah, I was essentially cut in half. And you know, also I had to take into consideration, like when you buy a home or somebody else, you have double income. So if something happens to someone’s job in an economic downturn, you have, you know, there’s a little bit more of a cushion when you have somebody else. But when you’re doing it alone, you have absolutely no cushion. So I had to take that into consideration, too. When I was looking at homes, I didn’t want to max out my pre-approved amount because, you know, what if something does change for me financially? I don’t have anyone to lean on. And then I really had to revisit the neighbourhoods. I wasn’t looking in the same neighbourhoods I was looking at when I had a partner with me. I was looking at much older neighbourhoods.
ROMA: Her parents helped to look for a house with good bones. In the spring of 2022, she bought her first home.
SARAH: Well, I want to preface this with, for anyone living in markets outside of Winnipeg, I do apologize because this is probably going to sound pretty cheap. And you’re going to think, my goodness, like, that’s crazy. But the house that I’m currently living, it was priced at $279K and it’s a 1943 home in Winnipeg and a pretty nice kind of central area of the city just under 900ft². It is a bungalow. It has two good sized bedrooms on the main floor, a full bathroom. It has hardwood floors throughout and it has a finished basement with another full bathroom in the basement. And then there’s a den as well in the basement. It’s not a legal bedroom, so it’s more like a den. And then there is a double garage as well that’s detached from the home. So that’s a really nice feature that I ended up getting as well.
ROMA: Sarah paid a 5% down payment and spent about $50,000 fixing up her new place.
SARAH: I updated about 80% of the windows on the home because they were all old, probably from like the 80s aluminum windows. I completely flipped the kitchen, so gutted it. Everything is new. All new appliances, you name it. New flooring. The first thing I did was I had to rewire the home because it was knob and tube. So in order to get insurance, I had to update the electrical. Going into the purchase, I was aware that that was going to happen. Also, I painted every single room in the home and I redid the basement. So all new flooring through out, painted it, all new drop ceiling, also leveled the floor. So prior to renovating the kitchen, I had to level the floor. There was a little bit of a hump. So that was a situation there. And I think that’s all that I did in the home.
ROMA: One of the biggest shocks of homeownership has been the unexpected costs.
SARAH: And I think it doesn’t matter whether you buy a new home or an old home, there’s always something. It’s kind of mind blowing, but something as simple as... I have my detached double garage outside of my home and have this big oak tree that was starting to impede on the structure. And I could tell that the previous homeowners had been like sawing away at a tree every year to try to keep it away. But it got to the point where I needed to do something about it. So I contacted a tree-cutting company and that was over a grant to cut that down because if I didn’t, I’d have, you know, larger costs in the future if it impacted the structure. You know, one day, I was leaving my garage, and the garage door stopped working, and that was $600. Hot water tank went. That was another almost $3,000 to replace that. So yeah, there’s been quite a few unexpected expenses, even something as simple as the stairs going down to the basement. They didn’t have a handrailing, which was definitely an issue. I didn’t want to risk having anyone fall, whether it be me or anyone else, even if I rented it. So I had a custom handrail built, which was $2,000. So. Yeah, there’s been a lot of unexpected expenses. Absolutely.
ROMA: She paid for everything by herself.
SARAH: My parents did not help me. My parents that have been really big on ensuring that we are independent. I remember when I was 13, I wanted a phone and my parents were like, well, you need a job because you don’t need a phone. So I got a job so I could buy a phone. And it’s kind of always been this way. And I used to be upset with them for that, but they’ve given me a really good work ethic, so I do appreciate it now. So yeah, it was just a lot of that. And I should also say that at the time, I was working a full-time job and running my business on evenings and weekends, so I was really grinding to make it happen. That’s something that I definitely did. So I don’t want to undermine that. It was just a lot of hard work and long hours.
ROMA: Sarah pays about $1,000 more a month to own a home than she did when she was a renter. SARAH: In terms of how I managed to bridge that gap financially, it just comes down to just kind of working more. I mean, I would say the level of work I do now, in comparison to before, is about the same because previously, I was working to save for that down payment and those upgrades. But yeah, that is one thing where sometimes I think because I work so much, sometimes I’m exhausted. I’m like, why do I do this? Was it worth it for a home? But again, I just know that I’m not going to be living in this home alone forever. This isn’t always going to be my financial situation. And it is an investment where if I was living in an apartment, I don’t think I would have been saving the same way. I think, having my mortgage, it’s like you’re essentially forced to save and have that investment, right? But it just comes down to just a lot of work, which is probably the best answer.
ROB: Our next guest bought a $700,000 condo on the West Coast.
ANDREA: Hi everyone. My name is Andrea. I currently reside in Vancouver, British Columbia, Canada, and I am 28.
ROB: Andrea works in marketing at a tech company and does part time content creation. She makes about $200,000 per year. She was only 24 when she paid her first deposit on a presale condo.
ANDREA: A point that a lot of people ask me is, did you have help with this? Which is a very valid question. I feel like people in Vancouver and Toronto or big cities in Canada, in order to buy a place, you think, you know, mommy, daddy helped you. Bank of Mommy, Daddy or your partner helped you or something like that. I’ve had all the allegations. Right. And I want to confirm that I did not have any financial help. It was fully solo, by myself, with no help of a partner, parent friend or a loan from the bank. It was just cash that I saved up over the years that I got through investing and working my ass off.
ROB: Homeownership has been Andrea’s dream since she was very young.
ANDREA: I didn’t grow up with a lot. At one point in my life, I slept on air mattresses that had holes in it that we would have to duct tape and pump up every morning. So even at the age of 12, I was like, wow, it’d be a dream of mine to have my own bed, let alone to have my own home one day. So I think comfort was key and something that I really wanted to look forward to in my future. And I kind of reverse-engineered what I wanted for myself. And that really helped me keep a goal in mind and really helped me have that vision of what I wanted to achieve at a certain age as well.
ROB: Andrea also started working when she was 14. She was investing by the time she was 18. She was also careful to avoid lifestyle creep, that’s where you spend more once you get a bigger paycheck. ANDREA: I chose to live a more humble life now. So in the future, in my future self, I’ll be able to maybe, hopefully, retire early and live a more luxurious life later, which is really nice. So I still take public transit. I don’t have a car. You know, I lived with my parents for as long as I could. I don’t buy designer bags every year or sometimes I buy like used clothes. I go thrifting, like stuff like that.
ROB: Andrea settled on a 600 square foot condo with one bedroom and a den. It cost about $700,000. She bought a presale in part because of the deposit structure.
ANDREA: You didn’t have to have a whole lump sum of the down payment all at once. It was 5% on the initial offer and then another 5% in six months after that. After that, six months, another six months, the other 5% and then the last 5% at the two-year mark. So I had almost like two years to save for the 20% down payment and such, which was doable as well. So I didn’t have the lump sum. I didn’t have the whole down payment amount at first when I put the 5% down, I just kind of bet on myself. So yeah, that’s a risk, right? So it depends on how risk-averse you are. And I was like, I trust myself that I would figure it out in the next two years to get that X amount of the 20% down. And I was able to make those payments.
ROB: Andrea’s condo is still under construction, although it’s scheduled to be completed in 2025. Until then, she’s still living with her parents to save money.
ANDREA: I had the privilege to live at home. And, you know, on my TikTok, I made a TikTok about this, and people were like, not everybody has that privilege. I absolutely understand. I paid my rent and my mental health. That’s fine. You know, living with your parents as an adult is not easy for everybody. Of course I want independence and autonomy and stuff like that. But I’m like, You know what? There has to be some give and take. Like, I will do this now so I can have more later.
ROB: She’s not the only person she knows who bought a condo in their 20s.
ANDREA: All my three best girlfriends are solo home buyers under the age of 25. We all had similar dreams and we all wanted to help each other out. And they invested in Toronto. They invested in Vancouver and we just like, helped each other out. We researched together. We helped each other grow. And I think that was the biggest thing for me as well. I’ve been friends with them for years now. So we were talking about looking at places, you know. When we were 20, we were like, let’s just go to an open house to see what’s possible. You know what I mean? Just like putting ourselves in spaces to connect with people to get some more knowledge of how we can really get to the next steps and just supporting each other in our savings and stuff. Like me and my girlfriend Sam, she just recently bought a place two in Vancouver and we branded this thing called Stingy Sisters Season where we would be saving and, you know, sharing our saving goals with each other when we’re trying to put our down payment for our presales and stuff like that. So just having people in your corner and cheering you on and understanding what you’re going through was really helpful throughout the whole process as well.
ROMA: Our next guest feels like the home buying stars aligned for him.
STEFAN: Hello. My name is Stefan. I am 29 years old and I live in Mississauga, Ontario.
ROMA: Stephan is a civil engineer who makes around $100,000 a year. Homeownership has been his goal since high school.
STEFAN: The primary reason for that is because I place a very high value on my independence. I know a lot of people typically view homeownership as like an investment or a retirement vehicle. And not to say that I necessarily disagree with that viewpoint, but at the current stage in my life, I saw it as a very important milestone toward independence and just feeling like more of an adult. And I guess just to give a little bit more context, my family and I are all immigrants to Canada. Like none of us were born here. We moved here in about 2003, which is roughly 20, 21 years ago. And for the first seven years that we were living here, all four of us lived in a two bedroom apartment. And I shared a room with my younger sister until I was in grade ten, which, as you can imagine, like she’s only three years younger than me, so we went through puberty at roughly the same time. We were kind of at each other’s throats.
ROMA: Stefan lived at his parents home in Oakville when he went to university. He moved out for about six months during his master’s degree. Then the pandemic hit. His roommates abandoned ship, and back home he went.
STEFAN: So I got a little bit of freedom, and then I had to move back in right now. So I’m 29 now, and it just it seems like it’s the time for me to finally leave the nest. Like I said, just to feel like more of an adult.
ROMA: Stefan got very close to moving out and renting. Instead, he decided to stay put and focused on saving. STEFAN: I’ve always been, I would say, a more like frugal person because I had this as a long-term goal. I never really spend very lavishly. I always put money aside and more importantly, like invested. I opened up my TFSA, actually, I think I was either 19 or 20 years old, like my first internship out of like university and my first summer job. I opened the TFSA, and it was like I was putting in barely anything into it. But I was just like, I want to start the process as early as I can. And over time, that money just sort of grew and grew.
ROMA: He invested in blue -chip stocks and ETFs, but to really get ahead, he needed to get rid of one big expense.
STEFAN: So I graduated my master’s with roughly $40,000 in student loans. It took me roughly three years. So from 2020 to halfway through 2022 was when I was able to pay it up. The biggest sort of hurdle towards making the saving for the down payment, I think was my student loans. I had to sort of balance investing with paying off my student loans. So typically it would have been like 50-50. Like I said, I wasn’t a very extravagant spender or anything. And even to this day, my car has 200,000km on it. I bought it from my dad, like when I graduated university for like $4000 or $5000. My phone, I think is like 5 or 6 years past the generation of the most current iPhone.
ROMA: Even with his savings and his loans paid off, Stefan’s still didn’t have enough for a down payment. Then his mother received a surprise inheritance and she offered to help him.
STEFAN: Even with all of my sort of frugality, I could not do that on my own. I’ve been extremely fortunate, extremely lucky to have parents that were able to pitch in roughly 50% of that downpayment. I was only able to put in half. The only reason my parents were even able to contribute that amount was because my grandmother on my mom’s side passed away a couple of years ago and my mom was an only child, so she was the sole inheritor of the estate. My grandmother had left behind like some property from back in Macedonia. Once she was able to sell that property, she then approached me and we started having the conversation of ‘I can give you this much as a gift, but that is only on the condition that you use it toward a down payment.’ Like, she didn’t want me using it for anything else. And I said, I’m on board. Like that would be the first thing I had in my mind to use that money for. So all of the sort of stars aligning, like me paying off my student loans, saving up like my share of the down payment and then my mom finally selling property that my grandmother had left behind for her, happened around like summer to fall of 2022. And then from that point, that’s when we sort of started going and talking to mortgage brokers just to sort of see what I would be approved for. We started looking at places and before I knew it, I signed on to something. And here we are today. ROMA: Stephan’s condo cost about $525,000. They put 20% down. But in order to get a mortgage, his dad had to cosign with him.
STEFAN: I think the level of background checks that the bank did made it feel as though I was applying for a job at the FBI or something. They were asking me about like, what did you do for work like six years ago? I was like, is this necessary?
ROMA: Stefan bought a one-bedroom with an office and a parking spot in the spring of 2023, but he couldn’t afford to move in.
STEFAN: When I bought my condo, when I put the down payment, I had to empty pretty much every account I had like my TFSA. I even had a work RRSP that I had to prematurely empty to make up sort of like my portion of the down payment. I may as well have been flipping over like couch cushions looking for change to put towards my share of the payment. And I knew that when I made it sort of like happen, that I wasn’t going to feel comfortable moving into a condo with almost $0 to my name after the fact, emergency savings and what have you. And also I wasn’t even able to furnish or like do any of the sort of like renovations that I wanted to it. It is a little bit older. It was built in 2009 and I wanted to do some things, like painting and like changing out maybe some of the cabinetry or some of like the appliances. And I had no money to do any of that. So as soon as I bought it, I immediately just listed it for rent. It’s been about a year and a half or so that I’ve actually been renting it. And it was sort of pre-agreed upon with my tenant that, listen, like I won’t sort of like raise the rent or anything like that as long as we can sort of agree that this would be like a year and a half long thing.
ROMA: He plans to move into his new place this month. He’s been surprised how much it costs for things like renovations, condo insurance and property taxes. The condo market’s also taken a hit since he bought, meaning he’d lose money if he sold it today. But that’s not part of the plan. His advice for anyone who wants to buy, save, save and save.
STEFAN: For anybody out there that’s maybe listening and trying to find advice from my story is that I think that you should still do your best to set yourself up well financially and invest wisely if you can, especially if you share similar dreams about homeownership that I had, like if you’re viewing it primarily from the perspective of like you want independence, you want to sort of leave the nest, kind of like I did. Because if you’re viewing it as like primarily an investment vehicle, I think my story sort of like illustrates that you’re not going to make your money back in a matter of like a year or two, not necessarily, especially not in the current climate. It’s well worth anybody’s time to make a plan, regardless of how far off in the distance it seems. When I was thinking about this like 5 or 10 years ago, I had no idea that my parents were going to be able to make this extremely generous gift. So even if the plan that you make doesn’t sort of pan out, you don’t necessarily know what kind of opportunity you’re going to be presented with in the future. And I think in order to be able to seize those opportunities, you should sort of try and position yourself as well as you can.
ROMA: Hard work, sacrifice, and probably a little help from your parents, that’s what it takes to be a solo first-time buyer in Canada. If this is a goal you have, Rob has some takeaways for you.
ROB:
1. Buying solo is totally doable, but you’re taking on a big financial load. Be sure you’re up for that.
2. Consider moving back home or finding roommates to help you save a bigger down payment. Near-term sacrifice for long-term gain.
3. You’re going to need savings. Without a partner, having cash safely parked is vital in case you’re sidelined by illness or you lose a job or income.
ROMA: Thank you for listening to Stress Test. This show was produced by Kyle Fulton, Emily Jackson and Zahra Khozema. Our executive producer is Kiran Rana. Thank you to Sahra, Andrea and Stefan for joining us.
ROB: You can find Stress Test wherever you listen to podcasts. If you like this episode, please share it with your friends.
ROMA: Next week on Stress Test, some Gen Z and Millennials are looking to quit the hustle culture. They’re sick and tired of the constant grind, especially since they don’t feel like they’re getting ahead. We’ll talk about why and how people are slowing down to live a soft or softer life.
ROB: Until then, find us at the Globe and Mail dot com. Thanks for listening.