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Many first time buyers find themselves torn between shopping in the new construction market, or looking for an older home to renovate. The decision isn’t always simple or obvious. While some are attracted to the unique character of older homes, others prefer the convenience of a turn-key condo. To help yourself decide which best suits your needs, ask yourself these 5 questions:
1. How are your finances structured?
While you might have read online that resale home are always cheaper, this simply isn’t true. Home prices in Montreal like in many other cities depend more on location and quality and location than on age. For example, it’s relatively easy to find a brand new/ pre-con condo in the Southwest in the $200-$250K range, while a quaint older home in the Plateau would put you back at least twice that amount. The disadvantage of pre-con’s, however, is that most developers require a hefty downpayment. For the best pre-con deals, you should expect to pay at least 20% before your move-in date.
1. If your budget is only between $200k and $300k but you have at least $40K available in cash savings, you can consider investing in a pre-construction.
2. If you have a low budget and under $10,000 in savings, look for a new development that’s in its sales phase. You’ll pay slightly more in principal, but most projects wave their downpayment restrictions once they’ve completed the construction. Alternatively, you could look for BMV properties (properties below market value).
3. If your budget is over $300,000 but you don’t have access to large lump sums of cash, don’t buy a home or duplex more than 10 years old. Older homes tend to come with large and sometimes unexpected maintenance costs, and unlike condos, the repairs aren’t shared between co-owners.
3. If your budget is higher than $350k and you have savings, you move onto the second question!
2. Is your move-in date flexible?
The advantage of a resale is that it involves negotiation regarding the possession date and the move in date. On the other hand, new constructions have construction deadlines, which we all know can extend months if not years. For buyers with specific move-in timelines, buying resale is the best bet. Alternatively, look for new constructions that have already moved past the construction phase into the sales phase.
3. Are you comfortable with DIY and repairs?
Chances are, you’ll have to pull out your hammer and drill far sooner if you invest into an older home. Many older homes need renovations or decor personalizations before you’ve even moved in. Does the thought of Sunday afternoons spent with a paintbrush and measuring tape make you jump with joy, or recoil with horror? Listen to your instincts when it comes to this matter.
DIY aside, home repairs are costly, and if you don’t have savings or access to credit, you’re probably better off going with a brand new condo.
Consider some of these typical capital improvements that may be part of the true cost to you over the early years of a purchase of an existing house:
• Roof: the average shingled roof lasts about 25 years. Replacement costs can be anywhere from $5,000 up.
• Heating and Air Con: The typical furnace has a 20 year life expectancy; the typical central air system 15 years. Replacing them could cost you $5,000 (air conditioning unit) and $4,000 and up for the furnace, depending upon the system you choose.
• Flooring/Carpeting/Tile/Hardwood Floor refinish: You’re virtually guaranteed to replace some carpeting in a resale home and you may need to upgrade other flooring or finishes. Costs can run anywhere from a few thousand dollars to well over $15,000, depending on your choices.
• Interior Painting: Again, with a new house, you choose the wall colors of the rooms as part of the package. With an existing house, you’re probably going to want to repaint some of the interior. Even if you do it yourself, it will cost money and time.
• Kitchen Remodel: think anywhere from $10,000 and $40,000.
• Master Bath Remodel: $15,000 and up.
If you don’t mind these figures and you’re still excited by the prospect of revamping an older home, you could consider getting a home improvements loan ,which would ease the initial financial burden of a renovation job.
4. Do you prefer modern or heritage aesthetics?
Which image do you prefer?
If you prefer clean, modern designs without the frills and fancies, your chances of finding your dream home are higher in the new construction market. If you’re leaning towards a space that’s oozing with charm and character, and that stands out amongst the cookie-cutter layouts, you’re better off looking amongst the heritage homes of the Old Port, or the quaint duplexes of the Plateau. Alternatively, you could look for an older home in an up and coming neighbourhood like St Henri or Pointe St Charles, and refurbish it completely to your tastes.
5. How important is location and community?
Resale homes tend to be found in more established neighbourhoods, usually closer to the Downtown area and historical districts. They tend to have infrastructural advantages such as walkable proximity to schools, urban transit and shopping areas. Older neighbourhoods also have a mixed bag of residents from young families, to renters to retirees. So for better or for worse, you’ll never be entirely sure of who you end up living beside until you actually move in.
New build homes, on the other hand, are often located in the inner suburbs or developing neighbourhoods. In Montreal, many of the new constructions are found in the South West, Griffintown, East Montreal and Rosemont. However, you can also find newly built homes in the Downtown core, where developers have torn down an older construction and built a new condo project. Brand new communities tend to attract more of a homogeneous buyer group, since their marketing and advertising is targeted to a specific demographic. If you’d prefer being surrounded by people like you- whether that’s starter families, seniors, or young professionals, you’re more likely to feel at home in a newly built project.