Home Buying Series Part 1: Choosing A Neighbourhood
You’d be forgiven if you’ve started to think that this blog is all about frugality. While we think frugality is the bee’s knees, we are just as passionate about making smart and informed financial decisions, especially at the critical junctures in your life.
Buying a home is one of these critical junctures. It is the largest purchase 99% of us will ever make. Therefore, if any financial decision warrants extensive research, reflection and education, it’s this one.
This home buying series will focus on our recent experience with the purchase of our first home. From the moment we decided to buy a house, we felt very strongly that we had to become as informed as possible about the home buying process and our options. If you take away only one lesson, let it be this: Do not go into the largest purchase of your life blind. Use the immense resources available to you to educate yourself, and come in prepared.
The internet was a major source of information for us, and we were complimented on our knowledge by the people we encountered throughout the process. We hope that this series will add to the wealth of information available online and help other people who may be going through the home buying process.
We made the decision to buy a home around December of 2015. We are by no means “home buying cheerleaders” who think that buying a home is a no-brainer or that it is always superior to renting. We went into this with our eyes wide open about the many challenges of home ownership, as well as the financial downsides. We do not see our home as a lucrative investment that will earn us a high return; we see it as a place to live. For us, there are non-financial benefits to home ownership that make it the right choice for us.
Between December and February, we spent a lot of time reading about the home buying process online and in books. Here are some topics I would suggest that prospective home buyers read about:
- Mortgages, including fixed vs. variable, terms, amortization periods, prepayment privileges and penalties, dealing with lenders vs. brokers, interest calculations, down payment requirements, qualification criteria.
- Working with real estate agents - pros, cons and what to watch out for
- The process for putting in an offer, having it be accepted or rejected, negotiations, common conditions in agreements of purchase and sale, etc.
- Closing costs - legal fees and disbursements, title insurance, your share of paid property taxes and condo fees, land transfer tax (in certain jurisdictions)
- Costs of home ownership - mortgage interest, property taxes, home insurance, utilities (electricity, gas, water), repairs and maintenance, condo fees if applicable.
- Your local housing market - is it currently a buyer’s or seller’s market? How have prices changed in recent years? Are there particular opportunities or challenges?
The next step was to start making decisions about where we wanted to live.
As the common saying goes, there are three things that matter in property: location, location, location. You can change everything about a house except its location.
Figuring out where you want to live is a critical first step. However, it cannot be done in isolation from figuring out what kind of house you want. The reason is that the neighbourhood you would like to live in may not have the home that you want, or buying that home in that neighbourhood may cost more than you are willing to pay. Making the right decision requires identifying what you want in a neighbourhood AND what you want in a house, and then finding a location that can meet both sets of needs within your budget.
Rather than selecting a specific neighbourhood off the bat, we recommend identifying a set of location-related criteria, and then identifying all neighbourhoods in the city that meet those criteria. Location-related criteria may include any of the following:
- Distance to your work, or to an area with many jobs, using the transit method you intend to use (car, public transit, biking/walking, etc.)
- Distance to amenities such as stores, community centres, schools, libraries, bike trails, etc.
- Accessibility of neighbourhood, i.e. ease of getting from the neighbourhood to other parts of town by car and/or public transit
- Age of neighbourhood (and the resulting impact on the surroundings, e.g. mature trees, style of houses, etc.)
- School catchment area
- Age of homes
- Safety and crime rates
- Impact of expected future changes on the neighbourhood, e.g. new transit line that will go into the neighbourhood
- Neighbourhood features such as sidewalks and parks
Here are the location-related criteria that we established for ourselves:
Must-have location features:
- Commute by bus downtown * requires only one bus and takes 30 minutes or less in total (including walk to bus)
- Commute by car to Kanata* takes 30 minutes or less even during rush hour
- In boundary area for good public elementary school
- Walking distance to some stores (e.g. grocery store)
- Safe area with low crime rate
Nice-to-have location features:
- Can get to Kanata with one bus
- Street with mature trees
As you can see, the length of our commute was an important factor for us. Our time is very important to us, and we know the toll that long commutes can take on people. Therefore, we wanted to ensure that both of our commutes would take no more than 30 minutes. For me, whose job opportunities are primarily downtown, it was important to have a convenient bus commute. Taking a car was not an option given that parking downtown is so expensive and that we wanted to remain a one-car family. For my husband, whose job opportunities are primarily in the suburb of Kanata, driving to work was the most practical option.
Our commute requirements were limiting factors which narrowed down our potential neighbourhoods. Kanata is a suburb to the west of Ottawa. Since we wanted to have convenient commutes to both downtown and Kanata, this limited us to neighbourhoods to the west of downtown. The requirement to have a commute of no more than 30 minutes by bus (including the walk) ruled out many neighbourhoods which were not on a major bus line to downtown. This requirement also narrowed down our options within a given neighbourhood. Only certain homes within a neighbourhood were close enough to the bus station by foot to put the commute under the 30 minute threshold.
While these factors limited our options, they were more than worth it. Setting these stringent criteria gave us the comfort that whatever home we ended up buying, it would be in a good location that would be conducive to the lifestyle we wanted.
Another important criterion was to be within walking distance of stores. In this age of purely residential neighbourhoods (especially the farther you get from downtown), this was not an easy requirement to meet. However, I am an avid walker and strongly dislike the idea of being dependent on my car for every chore and activity. My husband knows this about me, and remembers my frustration when we lived in a neighbourhood that was very car-centric. He encouraged me to keep this criterion on the list, knowing that it could be an important contributor to my happiness. We ended up defining “walking distance” as a ten-minute walk, wanting to make it short enough that we would not be tempted to use the car instead.
Finding our target neighbourhood was a process. Our views and emotions about it evolved over a period of a few months as we became more familiar with certain neighbourhoods and saw the type of houses that they contained. Open houses were essential for this learning process. My next post in this series will talk about figuring out what you want to buy in a house, and the value of going to open houses.
With our criteria in our hand, we analyzed the different neighbourhoods between downtown and Kanata and identified all the areas that met our criteria. We did this primarily using Google Maps. It was important to be thorough and not necessarily gravitate to neighbourhoods that we already knew well. The neighbourhood we ended up choosing was one that we did not even know before we began the house search.
Initially, our focus was on a very central and trendy neighbourhood that is closer to downtown than to Kanata. This neighbourhood met and exceeded all of our criteria. For example, my bus commute downtown would have been around 20 minutes, and my husband’s commute around 25 minutes. The neighbourhood was very walkable, with sidewalks on every street and cool stores within easy walking distance. There were mature trees and good schools.
However, as we looked at open houses, we started realizing just how expensive this neighbourhoods was, and the fact that you did not get much for your money in it. This neighbourhood had gentrified significantly in recent years, and house prices had skyrocketed. We had set a fairly wide price range for our house search; however, even the houses at the very highest point of our range barely met our house-related criteria. They were also old and small. It was becoming apparent that to buy a house here, we would have to give up on some of the house-related criteria we had identified, or to spend an amount that we were not necessarily comfortable with. As you know, we love value, and we just didn’t see ourselves getting good value in this neighbourhood.
As we reflected, we realized that many of the elements that made this neighbourhood expensive - in other words, what people paid so much to have - were not necessarily major selling points for us. One of the advantages of this neighbourhood was that they had a very trendy shopping strip, filled with cool stores such as gourmet food retailers, good restaurants, specialty retailers, outdoor apparel stores, etc. However, we had to acknowledge that our lifestyle was not one that would really allow us to take advantage of this benefit. We are frugal, don’t particularly enjoy shopping and almost never go out to eat. Doesn’t sound like people who should pay extra to be within walking distance of a trendy shopping strip, does it?
The other side of this is that we are homebodies. We like spending time at home and do a lot of things at home. We realized that for us, it probably made sense to have a home that was a bit bigger and a neighbourhood that was a little less enticing. We also realized that we would probably appreciate access to practical stores - grocery store, drugstore, dollar store, bulk food store - more than we would access to specialty retailers.
At the same time, we were exploring a neighbourhood further to the west, farther from downtown, but still well within the city. There were parts of this neighbourhood that also met all of our criteria. This neighbourhood had homes at different points of our budget range, and we saw that we could pay less while still meeting all of our house-related criteria. In addition, the houses were bigger and newer (although still not new - we are talking 50s and 60s rather than 30s and 40s).
One day, everything crystallized for us. We realized that this neighbourhood further to the west had a lot of excellent benefits that were really valuable to us. As we enumerated them, we realized that this was a really great place to live. We had also seen several homes in that neighbourhood that we liked quite a bit and that were within our price range. The decision was made.
We had chosen a neighbourhood. However, as mentioned above, our stringent criteria meant that not all homes within a neighbourhood passed the test. To meet our criteria, a home in our chosen neighbourhood had to allow for a 30-minute bus commute to downtown and a 10-minute walk to stores. (All homes in these neighbourhoods already allowed for a commute of less than 30 minutes to Kanata and were in a good elementary school area.)
Sound picky? It was actually essential. These were two of our five must-have location-related criteria, and the reasons we had targeted relatively central neighbourhoods to begin with. Paying the premium to live in these neighbourhoods but then not meeting these criteria would have been pretty silly.
We needed a tool to specifically identify the areas that met our criteria. Using Google Maps and our local transit site, we identified the bus line that went from the neighbourhood to downtown. The bus ride took approximately 20 minutes, so we knew that the house had to be within a 10 minute walk of the bus station.
As for being within walking distance to stores, we had set a limit of a 10-minute walk, which translates to roughly 800m. We ended up using this free Radius Around A Point tool to identify the specific area we were interested in. It allowed us to draw a circle 800m around the main shopping area in the neighbourhood, which was actually an entire mall.
One moment sticks in my mind. When we began working with our real estate agent, he took us to see five properties that were already on the market. Before our appointment, I looked up the properties and saw that four of them were within the radius but one was not.
We saw the five properties, and the last one was the one outside our radius. The first four properties were clearly not worthy of consideration. One was destined for demolition and rebuilding, another was overpriced with many necessary fixes, one was too small, and one we simply didn’t like. The final one, however, was a really excellent house. It met all of our criteria and exceeded some of them - for example, the kitchen was gorgeous, and we had resigned ourselves to probably not being able to get a renovated kitchen within our price range.
Our agent asked us if this was a home that we would consider. But we said no. It was out of the radius and therefore did not meet our criteria (I had sent him our criteria and our radius map beforehand, so he knew what I was talking about). In particular, this house was a 35-minute bus commute downtown and 13-minute walk to stores.
I explained that if we were going to deviate from our criteria, then there were many more areas within the city that we might consider - some with much lower housing prices. We had chosen this neighbourhood because it had areas that met our criteria, and we had to focus on those areas. From that point forward, our agent knew that we did not want to look at houses outside the radius.
I got the impression that this was fairly unusual behaviour on our part. Our real estate agent said that he had never seen anyone come to him with an exact radius map like this - although to give him credit, he never made us feel weird for it and never criticized; in fact, he acted impressed. And yet, these location-related factors have an impact on every single day of our lives. Why wouldn’t a person be specific about what they want?
My point is this: Do yourself a favour and be as specific and as demanding as you want to be. Identify what matters to you, and do not settle, especially about location. You will never be able to move the house. A perfect house is not perfect if it is not in the location that you want it to be in.
We ended up finding a wonderful home that is well within our radius. It is a 28-minute bus commute downtown and a 7-minute walk to the mall. I can’t tell you how exciting it is to have held strong on what mattered to us and gotten a house that meets our needs and wants.
When we developed our list of criteria, we were very cognizant of the fact that we had to distinguish between must-have’s and nice-to-have’s. We knew that every must-have would further narrow down the pool of potential houses and therefore had to be selected carefully.
With every criterion that you determine, you have to ask yourself how important it truly is. Is it going to have a significant impact on your day-to-day happiness? Or is it just a preference or something that will have a minor impact on your life?
While it is important to limit your must-have’s, it is also important to recognize when a criterion is truly essential for you, and not ignore the instincts that are telling you to keep it on your list. For example, we knew we wanted a garage, but as we looked at houses in the trendy neighbourhood, we realized that many houses had no garage and that those with a garage were very expensive. We started considering removing it from the must-have list. However, we had to be honest with ourselves: Not having a garage would have a real impact on our day-to-day happiness. Having to park our car outside in the cold Ottawa winter and spend countless mornings scraping the car and getting it warm enough to drive would have caused a lot of frustration and inconvenience. This is even moreso the case when you consider that we wanted this to be a home where lived for a long time, perhaps even a forever home. That daily irritant is quite significant when you experience it over a long term, and it was important to properly value what having a garage meant to us.
When you do lean towards settling on a criterion, do a gut check and make sure that it feels right. Also, make sure that you are not being pressured by anyone, especially by your agent. I did have to settle on a location factor which was downgraded from a must-have to a nice-to-have, and was eventually removed from the list entirely. This was the presence of sidewalks. I appreciate walkable areas and there is no doubt that sidewalks make a neighbourhood much more walker-friendly. However, I simply had to accept that only the most central neighbourhoods - the trendy and overpriced ones - had sidewalks. I ultimately decided that the other pros of our chosen neighbourhood outweighed this one con for me.
More than almost any other home-related factor, the location of your home will determine your future lifestyle. This calls for a careful and thoughtful approach to finding your next neighbourhood. If you set clear criteria, consider all possible options and stand firm on your must-have’s during your search, you will increase the likelihood of ending up in a neighbourhood that you can be happy in for a long time.
How did you figure out which area you wanted to live in? What were your must-have criteria? Did you have any surprises or regrets about your neighbourhood?