Welcome friends today, I want to take you on a journey and share a distillation of one of my experiences in dealing with real estate. I'll share some insights that will help you make better decisions for your homeownership and investment goals in real estate.

Having been involved in numerous client discussions on real estate scenarios and meeting with them to solve their selling, buying, and investment goals, I've gained some interesting learnings. Today, I'd like to share one of those with you: how our psychology works when we are dealing in real estate and how we subconsciously do certain things without even realizing them. And how it impacts our better decision ability.

If a client or a family has lived in a certain location, maybe initially even as a tenant. Suppose a family comes to the Greater Toronto Area and has lived in a given location for 2 years. When the family is now ready to move to the next step of homeownership, they want to stay close to where they have lived. If you speak to them, they will advise how good and convenient the location is and the high points of being in that location, or particular pocket of the GTA. What is happening here is when we live in a certain location, we become comfortable and used to the surroundings of that area. We know where to bank, where to go for groceries, and other civic amenities like parks, libraries, shopping, recreation, theatres, etc. Our subconscious becomes comfortable with the road and traffic patterns, and everything seems familiar and at ease. Our brain develops reasons and gets adapted to the location for all activities. This holds good if the family is living in their first home for 3-5 years and now are moving up to a bigger property, they would want to be in the same location, fully understanding that they have the opportunity to break the status quo and can opt for any location.

As humans, we do not want to get away from their BAU (Business As Usual); they don't want to upset the familiar conditions they have living in a given neighbourhood. Now for ownership for their own living or even for investment, they would always want to be closer to that location, for the same reason.

This holds good for the most part, and I have seen this umpteen number of times. A person who is living in the Far East of the GTA, say in the Durham Region or in East Toronto, will always want to stay in the east-end only, as they have gotten used to that part of town/region, and it's very difficult for them to have something distant from their home base. On the same lines, suppose a young family has stayed in downtown or uptown Toronto in a condo for 2-3 years, they are more than comfortable in that lifestyle. It's an uphill task for them to imagine themselves in a typical suburban low-rise setting. They are very much in tune with the hustle and bustle of a dense downtown neighbourhood and are not willing to trade that feeling. As another example, a person living in Brampton, Whitby, Mississauga, Hamilton, or Vaughan would want to continue to live or move up within the same geography.

When I look at the goals of a family for getting started with their first-time homeownership or a secondary asset as an investment, I am looking in an unbiased way and fully knowing the merits and demerits of various municipalities. It is my responsibility to advise them that it would be very natural that when they would want to upsize, they would always want to be in the same community or at least the same town. However, growth always comes with change. And when we take the decision for the biggest investment asset of our lives, we should be more objective and less emotional. If there is an opportunity to buy real estate, we should try to get away from these usual thought patterns and rather objectively review various municipalities where our budget can meet our property goals. And then go for the best town/area/property type/style which my budget allows me to purchase comfortably.

If I have lived in a certain area for my initial tenancy period or as my first home, that doesn't mean that the same area is the only defacto choice for me when I am ready for homeownership or executing a move-up scenario. There would be cases when it is the objective choice also, but mostly we see that it becomes more of an emotional decision where we don't want to disturb our familiar surroundings.

This phenomenon you will also see in terms of style of properties too. If as a family we have lived 2-3 years in a high-rise condo setting, I will always gravitate towards that property type when the time comes for ownership. Even though a low-rise dwelling would mean better space utilization for a growing family, I would still want to be in the familiar high-rise setting.

Right Approach - When Buying for Your Own Living:

For the correct approach to real estate homeownership when you are starting to shop for a home for your own living, you need to qualify your budget and then very objectively review the various towns where it is logistically sound for your living based on your work commute, schools, recreation, transit, amenities, etc. Things which are important for your family in the next 5-10 years. Don't be wary of new locations, neighbourhoods, towns, as there could be places which work even better than your last address. Now that you are ready to purchase, why not take the opportunity to explore other areas and invest your hard-earned money credibly in a very objective way.

Right Approach - When Buying for Investment:

For perfect decision-making when buying for a rental cash-flow property as an investment; in this scenario, you are far more flexible as you personally are not going to live there. The property need not be extremely close to your residence or closer to your work location. This would definitely call for thinking wide open; all areas as long as they are in a 20-50 km radius are open for your investment. It is again a myth that for a cash-flow rental property you would need to visit every now and then; the truth is that the visits are not that frequent as you might think. So, this should not deter us from investing in the best location and property type/class which gives me good growth and future upside potential.

I hope you are able to realize from this discussion how pre-conceived notions play a big role in our decision-making and impact our portfolio and living. Feel free to share it with your friends and colleagues who might benefit from this. For any objective advice in real estate, reach out to our team here at Elixir, and we will help in the best way possible. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Off: 416-816-6001 | [email protected]