Building Wealth Requires the Courage to Make Unpopular Decisions

SPEAKER_1 (0:00)

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George Kamel (0:23)

Normal is broke and common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the FAIRWINDS Credit Union Studio, this is The Ramsey Show. I'm George Kamel here with Jade Warshaw. Taking your calls at 888-825-5225, jump in, we'll have a conversation about your life and your money.

Annika kicks us off in Toronto. What's going on, Annika?

SPEAKER_3 (0:48)

Hi. So we're a little family of three, my husband and I and my 10-month-old son. And we're hoping to buy a place in the next six months to a year.

We're just not sure if now is the right time. I'll give you a little bit of background. So we have saved up a $175,000 down payment. Our household income is $70,000 a year.

And in our city, we could buy a place and have all of our monthly payments under 25% of our income with a 15-year immortalization period. But it would be a condo or a townhome. And we've been advised by realtors that they're not likely to hold their value as well. And since we kind of want to use it as a stepping stone, only lived there for three to five years, we just we don't want to lose money on it. So we're wondering if it makes more sense to wait, save up a little bit more and buy a better place from the start.

Jade Warshaw (1:43)

Did your realtor give you a reason why they believe that condos or townhomes don't hold their value?

SPEAKER_3 (1:51)

Yeah. So it's particularly in our city. Apparently, they like overbuilt condos. And so there's kind of excess supply at the moment. And just in recent years, they haven't seen the same appreciation as other properties.

Jade Warshaw (2:06)

So I think there's a difference between not seeing the same appreciation and it going down in value. If I heard that information, my first thought, George, would be, okay, I need to be sure that I don't overspend on this, that what I'm buying is truly market value, and I'm not getting emotionally attached and accidentally paying more than I should for that particular condo or townhouse. That would be my first thought. And then I'd want to pull some hard facts and see, okay, what is the appreciation rate? Is it appreciating? Because as long as it's going up, I'm fine with that, as if I can get something that I can actually afford versus taking someone's word for it and it sounding more anecdotal, you know, well, these things, you know, they lose value because it's, those are two very different statements, a loss of value versus a slower appreciation rate.

Okay.

George Kamel (2:56)

Now, are there other neighborhoods that maybe are more desirable that you guys could look at for a condo or townhome?

SPEAKER_3 (3:04)

Not within our price range.

George Kamel (3:05)

Okay, so give me a price point that you're currently looking at and what would sort of the next step up be?

SPEAKER_3 (3:12)

Yeah, so we're kind of looking in the 250,000 to 300,000 range. And that just depends on the HOACs.

So, yeah, within that range.

George Kamel (3:23)

How quickly can you guys save up? I'm impressed you guys saved up 175,000 making 70 How'd you do that?

SPEAKER_3 (3:31)

Well, we saved most of that before we were married. And we kind of both, like we're living at home but working.

We can save about $25,000 a year.

George Kamel (3:43)

Okay.

Jade Warshaw (3:43)

That's great.

SPEAKER_3 (3:45)

It would take us two years to kind of save up enough for the next level, if that makes sense.

George Kamel (3:50)

Yeah. The issue I see is just the goalpost keeps moving and the home prices could change dramatically in the next two years. We just don't know what the future holds. So I would hate for you guys to save up 50 grand over two years and then that same house is now 50 grand more.

And it was a wash.

SPEAKER_3 (4:05)

And another thing I should have actually mentioned is our current rent is actually 31% of our income. And it's almost impossible to find something cheaper than we're already paying.

Jade Warshaw (4:17)

I think that your real estate agent put a little bit of fear in your heart. And if I were in your shoes, if you buy what you can afford and you buy it on good principle and with good sense, the 25% rule, 15 year fixed rate mortgage, right? All of those things. I think that you're going to get into that condo or town home and be glad that you did it. You're going to be back down to 25% as opposed to 31%.