# To Upgrade or Grow Into



## Agape (Apr 3, 2009)

Recently my wife and I were discussing what type of home we would buy and the amount we were willing to spend once we started looking for a home. 

These were two of the options that we looked at.

*1) Grow Into: * Buy a home large enough to meet the needs of our expect family side while look for great neighborhoods and schools. Spend above the desired amount to achieve this.

*2) Upgrade:* Buy a cheaper home that is sufficient to meet our needs for 5 years (+/-) and then move to a larger home. By this method I would hope to pay the a large chuck of the mortgage off in that time period to minimize interest costs.

b.t.w no matter the decision I will only buy with 20% down, however how much above and beyond that is determined by our availability to wait and the size of house we purchase.

We are both professionals in our mid 20's who can expect moderate income increases in the future however these will be offset by a large expected family.

What are you're opinions regarding the two options? In terms of moving with kids, interest costs, other factors to consider, etc.


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## brad (May 22, 2009)

Tough choice.

I hate moving, so I would opt for the "grow into" approach, assuming your jobs are stable, you are planning to settle in one place, and will stay there for a good long time. If you get a place that's too big for you, you might want to consider renting out part of it, or even a room or two, until you start needing that space for yourselves.

However, if you're not quite sure where you want to live, and if you really thiink you can pay off a good chunk of your mortgage in 5 years, then the upgrade approach might make more sense...you'll have more time to suss the neighbourhoods, schools, etc. where you might eventually want to settle, and when you buy your bigger house you'll have a larger downpayment due to the equity you've built up from the smaller one.


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## Rickson9 (Apr 9, 2009)

Upgrade.


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## dogcom (May 23, 2009)

Purchase the larger home if you think there is a good chance that home prices will go up alot in the next 5 years. If you expect home prices to go down alot then buy the cheaper home and upgrade to take advantage of the lower prices. Also if you live in BC or Ontario you can save money I believe by buying before the HST comes in. I like the idea mentioned of buying a home with a rental suite inside that you can use later use for your larger family. 

Also consider commuting costs and buy in a good area. Don't buy cheap in a not so good area because it will be hard to sell.


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## Berubeland (Sep 6, 2009)

*How to buy a house (and make $$$)*

First off now is a great time while you and your wife are single to make money in real estate. When buying property it is good to look for the following opportunities. I prefer private sales but real estate can be good too.

Abandoned houses 
Neglected houses with long grass might be rentals or elderly
Large lots can be subdivided sometimes
Double brick bungalows can have a second story added
Crappy stinky houses - house can be destinked 

To find where the owner's are you can put a note in the mailbox or go to city hall and look up tax records.

Don't buy where your friends are buying in good neighborhoods. You have time try to buy where they are building big box stores. They have complex calculations to predict the next good areas before anyone knows they are good.

If scanning mls look for detached houses priced as attached
abnormally low prices for the area
other things that add value. 

Don't be scared "to insult the buyer" with a low offer. The only illegal offer is the offer with a gun. Other than that they are free to say no. Just keep going.

This is the most important purchase of your life in $$$$ value make it count. 
Also advertize in craigslist & kijiji that you are looking for a house. Make a wish list and wait. Cash is king. 

Always do a home inspection and use it to negotiate the price down. Look for estate sales, divorces etc.

If anything comes to mind i will let you know

Also this is very possible, one street over from me there is a boarded up 4 bedroom and the next street over there is an abandoned house with no shingles on it. These deals will pay you mare than you make in one year, it's worth looking for the needle in the haystack.

In Real Estate you make money when you BUY.


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## dogcom (May 23, 2009)

Berubeland don't forget they have to live there. When you buy a cheap stock you don't have to call the police or worry who has also bought the same stock. 

Buying in a good area I believe is important.


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## Berubeland (Sep 6, 2009)

Why do you believe this is important? 

I am suggesting they buy in an area that is gentrifying. They have no children so schools are not important. 

i want them to make a whack of cash so they can buy where ever they want next


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## Spidey (May 11, 2009)

There are certain factors that I would weigh higher than either "upgrade" or "grow into":

- good neighbourhood eg. Relative low crime, low vandalism, no undesirable facilities in the area (probation centers, methadone clinics, etc.), generally good middle to upper-middle class neighbours
- proximity to work (extremely important in my opinion, as this can often save thousands in commuting costs)
- proximity to other amenities (shopping, recreation, libraries, cinemas, etc.)
- future resale potential. It may be worthwhile to move into a neighbourhood with very desirable schools (possibly even French immersion) even if you have no children. Also for detached homes the greatest market is often for 3 bedroom and at least 2 bathrooms (preferably 3).

With all that into consideration, if you are planning a family within 5 years, I would lean toward "grow into", if it is affordable. Moving with young children can be challenging and moving and real estate costs could easily negate any savings related to temporarily living in a cheaper accommodation. If you are talking farther away than 5 years, then I may lean toward "upgrade".


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## steve_jay33 (Aug 29, 2009)

Unless you can renovate I would buy a "Grow into"

In such a short timespan of 5 years any money you would build in equity would be eaten up by costs to buy and sell. 

If housing prices do go up, your bigger house will cost more in 5 years. 

On a 300K home you will spend 15K on a Realtor and possibly (if not more) 15K on closing costs. (Taxes, moving, renovations, etc)


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## Potato (Apr 3, 2009)

I'd suggest going the "upgrade" route, but renting the starter home. It can be pretty pricey to sell and upgrade, so if your "5+/-" years is towards the shorter side I'd say don't bother trying to own: either rent or stretch for the "forever/grow into home". All considerations of the property market going up or down (and I am a bear in that regard) aside, you'd be looking at having to cough up a fair portion of the house's value to sell it: the real estate agent fees, lawyers fees, and if you live in Ontario (or worse yet, Toronto), you'll have the land transfer taxes, so you'd have to pay an additional few thousand on the forever home. All told you could be looking at 7-10+% to unload your starter home, which could pay for a year or two of rent right there.


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## firsttimehomebuyertips (Oct 3, 2009)

One other thing to consider is that a larger house costs more in property taxes, heating and cooling. I agree with Potato though that it is expensive to sell a house and buy another. Perhaps buying a home with an unfinished basement that is high and dry. Then renovating the basement when the time comes. That is what my sister and her boyfriend did a few months back. She is happy with her house.


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## sprocket1200 (Aug 21, 2009)

your house is your home, not an investment. don't think of it in terms of how much it will go up in value. that is a suckers bet that many have fallen prey to. if you are not scared of increasing interest rates, you need to make yourself scared of inflation...


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## Alexandra (Apr 3, 2009)

Three words:

Land Transfer Tax

It's going to hurt - best to pay it as few times as possible. Maybe you should look for a home that has a basement unit you can rent for the time being and then take over as your own once your family grows.


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## scomac (Aug 22, 2009)

Alexandra said:


> Three words:
> 
> Land Transfer Tax
> 
> It's going to hurt - best to pay it as few times as possible.


While I don't disagree with this statement, I would urge you not to let the tax tail wag the investment dog. Land Transfer Tax needs to be a consideration in any long term real estate investment plan, yet it would not be wise to draw a line in the sand and say: "We will take this approach so as to a avoid a possible future assessment of LTT despite other drawbacks."


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## sprocket1200 (Aug 21, 2009)

yeah, except besides LTT, there are many other taxes, fees, costs, etc, just related to the transaction, let alone the move itself.

this is exactly why buy and hold is so hard to beat, and why buying used it much better especially in automobiles!!

you can do a lot of repairs, purchases, etc with all that tax/fee money.
then again, some people just rack up fees and don't think twice...


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