Being a first time home buyer has it’s pro’s – you have money ready to go and may only have to get out of a lease or your parents place. However, after you’ve bought and you’re ready to move up in the market adding buying and selling at the same time makes the process trickier. The path up the property ladder is different for everyone and which to do first depends on your unique circumstances.
Buying and selling a home at the same time is no small endeavor and involves extensive research and a clear understanding of all the steps involved. Here are some things to consider before making a move:
Should I sell first? The upside of selling first is that you will know how much money you have to work with, and it’s also easier to get new financing when you need it. However, if there are delays or challenges in finding the right new home for you, you may incur additional rent and storage costs in the interim.
Should I buy first? In this case, you will have time to plan your move and get your current home ready to sell. However, closing dates on both the purchase and sale may not line up and if your home doesn’t sell for a while, you’ll be stuck with two mortgages at once and a higher debt-to-income ratio.
So what’s the best move? Add a contract contingency!
Whether you’re buying or selling, I always recommend adding a contingency to your contract that lines up the closing dates to bridge the in-between period. This isn’t always possible, as it depends on the market and whether the buyer/seller is willing to agree to an extended or reduced period of time.
Know the markets. Research prices in the areas where you’re buying and selling. Not sure how to go about that? Hire a qualified realtor who knows the area, like myself. Let me do the work for you! The first place to look is are we in a buyers or a sellers market? This is the best way to decide which move to make first. As a rule of thumb, you want to sell first in a buyers’ market and buy first in a sellers market. Cause you don’t want to get stuck trying to sell a property that won’t move, or have no where to move into if your place sells fast in a hot market.
The ideal move? Consider rental revenue. Now the cost of being in the greater Vancouver real estate market usually prohibits this but you if you’ve been diligent on paying down your mortgage and have strong equity this could work. First: research the rental market in your area and calculate the cost versus profit ratio of renting out your home to tenants, rather than selling it. It could be financially advantageous, and real estate could be a great way to diversify your investment portfolio. Then speak to a mortgage broker (I know a good one) and see if you can leverage your position.
It’s always a good idea to meet with a realtor first to discuss your plans. Contact me for more information and to find out how I can help with your plan.
– Benjamin Loyal