We Bought a House!

The search is finally over! We finally bought a house. After a lot of dilly-dallying over a period of months, and trying to figure out if we should buy a house or simply continue renting, we finally made the call to buy and completed this task last week.

We may invariably be buying at the peak of the housing bubble here in Canada as the chart from The Economist illustrates below. But then again, we may not. Nobody knows for certain where we are in the cycle. But for now, money is cheap with interest rates at 1% and prime rate at 3%, and the real estate market is on fire.

The housing market in Ottawa is quite ridiculous, to be frank. Banks and lenders are falling over each other to push money onto borrowers, with the city’s big part of the population working for the government, with secure jobs, secure pensions (for now) and what-not. Unfortunately, this is not true in my case, where I do not have any job security nor pension from my workplace. While shopping, we saw some houses in extremely deplorable conditions with an asking price of over $500K. We couldn’t figure out whether to laugh or get annoyed when we saw two listings of houses with a pathetic picture of the outside and a headline “No internal viewings allowed. Buy for land value only”. And this was not really the best neighborhood in town! That sounds like things are getting out of hand, and we contemplated holding out until the bubble pops, which could happen either now or in a few years. The only consolation is that house prices in Ottawa aren’t as bad as Vancouver or Toronto where average house prices are closer to $1M mark.

Why buy?
Currently, we are renting a one-bedroom apartment in downtown Ottawa, which isn’t big enough for the two of us and no space for us to grow. The flip-side was that we rent a bigger place but between renting and buying, the difference wasn’t much and we decided that in the long run, we want to own a house. We ended up buying a place which fits plenty of our criteria – something well in our budget, relatively close to downtown, big enough for us to grow into (a 3-bed, 2-bath house), good neighborhood, close to one of our jobs (walking distance from my wife’s work), good school district etc.

This purchase obviously affects our investments and readers will notice a drop in our passive income going forward. I have sold off my mutual fund holdings that I intend to use for our down payment, but still need to sell a few more of our investments to cover our down-payment. I intend to sell off most of our existing ETFs and a couple of high income stocks as I want to keep holding the dividend growth stocks. This upcoming selloff could result in a possibility of us missing our target of $4,000 in passive income this year. But we are still happy about the decision – a lot happier than we ever anticipated.

The closing date is in July and we can’t wait to move into our new house.

31 thoughts on “We Bought a House!

    • Thanks MDP. You are right..the walking to work is definitely a big bonus. One of our friends did the same with their house – they realized that they would rather go over their budget and buy a house close to work so that one of them could walk and go down to one car instead of buying in the suburbs and both drive to work. Its a good way of seeing things if a family could live on one car.
      We are considering giving that model a trial run later this year – so my wife just parks her car in the garage for a month to see if we can live with my car. She does have to learn to drive stick shift before that though 🙂

      regards

  1. Congrats! Buying a house is in all likelihood the biggest one investment you will ever do, and as I went through this process as well last year, I know how scary it is it.
    Then again, whether you bought on the absolute high point of the markets only matters when you are selling and even then other properties will probably have seen their prices reduced as well. In that sense it is not much different than dividend stock, the underlying value matters little when you keep receiving the same amount dividend every month (with a house the dividend is the pleasure/joy you get from having a beautiful house!).

    Best,

    DW

    • Thanks D&W. It was scary indeed. As people say, its one of the biggest purchase one makes in their lifetime and its such a huge life event – it sure was emotional.
      You are right in observing that we have to see the underlying value of home ownership instead of just the price. It took me a few weeks after started house-hunting to realize that I shouldnt consider it simply as an investment, but try to find a house for which we think the value is fair and where we want to live for a long time. Also, we do not plan on selling the house anytime soon (or at all, we think), so the idea of making a quick buck buying and selling in a few years doesnt apply to us.

      I like the analogy of the dividend of the house being pleasure and joy 🙂

      regards

  2. Congrats on the house purchase! It’s an exciting time and I’m sure you’ll be second guessing yourself for a while, I know I still do every now and then, but just remember all of the reasons why you purchased the house in the first place. The good thing is that you very well could be selling your investments near the peak too. Congrats again and enjoy!

    • Thanks JC. I do take comfort in the fact that we are possibly selling our investments at the peak. I should probably write down all the reasons for buying the house and stop looking at the other listings now 🙂 Just out of habit, I keep going back to the MLS site to check houses. Hopefully that habit will die sometime soon.

      Best wishes
      R2R

    • Thanks Brian. We did keep that in mind when we were buying. One of the ideas we had was to buy another house or condo for investment purposes. We’ll see…if theres a correction in the housing market, that might make things a bit more interesting, but for now…we are happy with this big step in our lives 🙂

      Hahah…we keep getting that question a lot too – about starting a family 🙂

      thanks for stopping by and the wishes
      R2R

  3. R2R,

    Congrats on the purchase! You sound really excited. I’m happy for you guys. 🙂

    And the passive income may drop for a bit, but, in the end, this journey to financial independence/early retirement is all about happiness. And if this move makes you happy then that’s all that really matters!

    Enjoy the big move.

    Best wishes!

    • Thanks DivMantra.
      We sure are excited and cant wait until the end of July when we move in. We realize that houses will be a lot more work than living in an apartment, but still looking forward to it.
      Hope your own move went well..I saw your post earlier but havent read it yet. Thanks for stopping by.

      regards

  4. Grats on the new house man. Ya I know real estate is not cheap in Canada. The lot prices for houses are whats making everything so crazy. Its a hard call to rent or buy. You could buy in a hot market now with great interest rates in which u did or u can buy in a down market with high interest rates!! Tough to get a deal on both you know what I mean? Looks you guys are ready to start a family soon I take it? Hopefully you have a rental suite in the new place you can take advantage of or consider renting out a bedroom to a student for extra income to replace your lost investments for a little while until you recoup.

    Grats and grind on my friend!

    • Thanks Asset-Grinder…the decision whether to buy now when prices are inflated with low interest rates was the tough call, and we took a plunge. We’ll see how it plays out. We thought about getting something with a rental suite or duplex for a while but we couldnt find a decent place without going way over budget. We ended up with a place which was well within our budget, so we may look into investment property sometime in the future.

      regards

  5. Congrats on the new place!

    We bought in the south end of Ottawa, just out of town, almost 4 years ago. December 2010 will mark our 4th year here.

    Houses are expensive but when they are paid off, it’s a beautiful thing. Just 8 years to pay this house off.

    Going variable or locking in a 5-year term around 3%? The latter wouldn’t be a bad call…

    Mark

    • Thanks Mark.
      We ended up buying in Riverview (next to Alta Vista) – my wife works at CHEO.
      Glad to hear that you are paying off the house in 12 years. Pay it off while the rates are low. This is probably what people will talk about once the rates have gone up in the future and look back at this period.

      We ended up getting variable with the option of one change of switching to fixed during the term. I didnt know such products existed, but once our mortgage broker said this – it sounded perfect. We will enjoy the low rates for now and if we see the rates going up in a year or two, we will switch and lock in the fixed rates.

      Best

    • Thanks FJ. We cant wait until the end of July. Now begins the start of all the chores of packing and moving.
      Ottawa prices saw a big upshot 4-5 years ago, but have stabilized, but still tracking the overall upward trend. If the market falls, Ottawa homes will fall too…theres no escaping.

      Thanks for stopping by
      R2R

    • Thanks for the comment and the interest, Stoic. I was considering writing more about it if there was interest. I may write a few posts over the course of next month or so sharing our experiences.

      You have a great weekend as well
      R2R

  6. Congratulations on home ownership. You can eventually come home to something that you can say is yours…a feeling that makes all the sacrifices worthwhile. One advice, make sure to always keep a rainy day fund as you can no longer call the landlord to fix what is broken. 🙂

    Wishing you the best in your journey! AFFJ

    • Thanks AFFJ. We do have a rainy day fund and I want to grow that fund a bit more before I feel more comfortable about it. Thanks for the advice. Looking forward to making that house our home 🙂

      regards
      R2R

    • Hi Michael,
      Thanks for the wishes….we are very happy that we ended up buying a house and looking forward to the joys that come with it 🙂
      Yes, the interest rates are low and money is cheap…so not a bad time to borrow money at all.

      regards
      sabeel

    • Thanks Jon. Yeah Im trying to see this not as an investment buying at the top but just as something of value that I am willing to pay for a good home.

      Thanks for stopping by and the wishes

  7. your house sounds like a great investment to me, especially considering the fact that it will cost you almost same as rent. and even if prices drop at some point of time, just wait and it will come back. You have all good points – close to work, good school district, great interest rates! sounds like a winner! Congrats!

    • Thanks HHWG. Yeah after a long consideration, we decided to just go for it and will accept it if the prices go down in the future. The big selling points were the size of the house, location, interest rates etc.

      Thanks for stopping by and the comment
      R2R

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