The 7 Step Guide to Buying an Apartment: What Realtors Won't Tell You to Think About or Ask

The 7 Step Guide to Buying an Apartment: What Realtors Won't Tell You to Think About or Ask

Buying an apartment is different from buying a house, and can present a bit of a learning curve if you’re new to real estate and don’t know anyone who can coach you through it. So you don’t stumble too much, we’ve created this how-to guide to help you in the process.

Step 1: Ask yourself how long you would plan on living there.

Sometimes renting is cheaper than buying. If you’re unsure whether you want to live in your current city for five years or more, than buying may not be for you. Most city dwellings only go up in value, but sometimes they do drop. After a down payment, closing costs, moving costs, renovations, and realtor fees (if you decide to sell) buying could very feasibly eat up more money than renting ever would.

Whenever you buy a property, whether it’s a condo, apartment or house, you’re making an investment. Most real estate investments need at least five years before they become profitable to sell (for the reasons mentioned above). Yes, housing bubbles are very real, and it is possible for a property’s value to jump overnight, but it would be unwise to bank on one coming along right when you need it.

However, if you’re in love with your city, and could never imagine leaving, then buying is a no-brainer. Find a deal and go for it.

Step 2: Determine your budget.

It’s not a clandestine art figuring out how much banks will loan you. In fact, we’ve written out how you can do it in our article ‘How Much will banks loan me?’.

Basically all you have to do is determine what is 28% of your gross monthly income (before anything is taken out). Though banks can legally go up to 35%, financial experts recommend 28% be the max.

Next add up all of your monthly debts to determine your debt-to-income (DTI) ratio. Don’t worry about the total amount of debt, just the monthly minimums for each. Things you need to add up are student loans, car payments, credit card payments, and any other loan you may have taken out. Add them all up with the 28% number previously obtained and divide the sum by your gross monthly income. If the number is less than 43%, you’re good to go.

If your DTI is more than 43%, you’ll want to first pay down some debts or lower your maximum monthly payment (meaning go below 28% of your gross monthly income and look for somewhere cheaper to live).

Of course, if in order to pay down your debts you have to dip into what you saved for your down payment, some complications may arise further down the road. For starters, you won’t be able to put as much down for a down payment, and you likely won’t be able to pay for all of your closing costs. But there are alternatives worth considering, such as down payment assistance.

If the down payment and closing costs are things that keep you up at night, consider applying for down payment assistance. The requirements to get approved are not as stringent as you would think.      

Step 3: Do some research on the community.

Realtor’s aren’t free. Some of the things they need to be able to do  before they earn any money off of you include:

  • Give you an in depth analysis of where you are looking to buy. Are values expected to go up or down in the next five years? If so, how much is anticipated?

  • Be knowledgeable of future developments, and be able to safely speculate how those developments might affect the value of your purchase. Will they make your property value go up or down?

  • Know the pros and cons of nearby communities. Will they hurt your ability to sell your apartment or improve it?

Before signing with any realtor, give them an interview. Realtors make a good amount of money off their clients. They should earn their keep!

Step 4: Walk through every hallway and every floor. Stroll through surrounding streets. Use all of your senses five!

The floor of your prospective apartment might not be characteristic of the apartment complex as a whole, nor might your apartment complex be representative of the whole neighborhood. Do some walking. What do you see? What do you hear? Are there bars two blocks down? If so, does that bother or excite you?

If the apartment doesn’t come with a designated parking space, does it look like you’ll be able to easily find parking nearby?

How does it smell? Is it easy to dispose of trash? Do you have to walk down a flight of steps or are there garbage chutes? Are people piling their trash in the hallway until it’s convenient to dispose?

Is it noisy? Can you hear everything people are doing?

Walk around the surrounding communities. Talk to residents; talk to cops; visit during different times of day, and see what the area is like on weekends. Ask your would-be neighbors if they’re happy. Ask police officers if they would let their daughter move there. If they pause in thought, ask why.    

Step 5: Get an independent building inspection of the apartment complex.

You need to verify that the building is structurally sound. What is the quality of the overall workmanship, and does the building have any deferred maintenance that needs to be addressed? While every building needs something worked on at any point in time, you don’t want to get yourself into a situation where your monthly fees skyrocket overnight because delayed TLC suddenly snowballed into a host of other issues.

Step 6: Assess apartment ownership costs.

Most apartments bought are strata title— meaning you own the unit, but have shared responsibility of the building. Just as you would take care of a house, an apartment building also needs yearly maintenance to stay safe and livable. Therefore, such things as the building’s sidewalks, elevators, and overall amenities all need to be taken care of. To do this, each apartment owner pays a yearly or monthly fee.

Before you buy, verify how much ownership costs are and ask if they are expected to rise in the near future (if so, by how much). It is possible that the fees could push your budget past its breaking point, and that your DTI (debt-to-income) could rise past the 43% threshold. If this happens, lenders won’t approve you for the needed loan amount.

While you’re digging, also ask to see the minutes of recent corporation meetings to know what was discussed. Are there any future capital works coming down the pipeline? If so, as a homeowner, will you be required to help pay for them?

Step 7: Do your final walk-through.

Horror stories abound of people not bothering with the final walk-through, so don’t become another statistic. When it’s time to do the walk-through, do it. You just never know what sort of hijinks a seller will get into during his or her last days; a pipe might burst because he wanted to save money on heating before closing; a window might break from him trying to move something on his own; or all of the faucets and door-knobs might ‘disappear’ because he became sentimental before locking the door one last time. Whatever you can think of, it’s happened, and it’s happened to a lot of people who thought themselves too busy to do a final walk-through.

It boils down to due diligence.

There are lots of great buys out there, but there are a few you’d be better off avoiding. Ask the right questions and verify everything you hear. If you do, you’ll be well on your way to owing the apartment that’s right for you.

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