Buying your first home could quite possibly be one of the most exciting and memorable experiences of your life. Not only is it a time to choose your own paint colors (without your landlord’s approval) and retire that hand-me-down furniture set from college. It’s a time to prove your competence to the world, step into the big leagues, and take on your first substantial amount of debt. Congratulations!
Now, don’t get me wrong. I’m a huge advocate for first-time homebuyers. In fact, I think young people should purchase their first home as soon as they can afford it. I bought my first home at the age of 22, and I wish I had purchased my first home sooner. But, the truth is, first-time homebuyers are entering the market blind and without much help from their elders. We live in a society that craves instant-gratification, but the real estate industry is one that requires patience and careful calculating. While the best way to learn is to simply get involved, here are a few quick tips for every homebuyer to remember, especially when making that first purchase!
- Your first home is not your dream home. Granite does not matter. I promise. This goes for all upgraded materials. While granite counter tops, ceramic tile floors, stainless steel appliances and a Jacuzzi bathtub seem to be necessities, don’t let them be when you are purchasing your first home. While these are wonderful upgrades, they are upgrades you can make over time. You do not need to overpay for them now. Chances are you may not even want the upgrades in this home. You may have your eyes set on another home in just a few years. So, focus on the basics. How many bedrooms and bathrooms are you looking for? How much square footage do you want? Does the property have a 1- or 2-car garage? Determine which of these key characteristics are most important to you, and find them first. Updating these items is far more costly than upgrading the materials within. Consider the property itself as the ice cream, and the upgrades, the cherry on top. Focus on the ice cream. Don’t be lured in by the cherry!
- Don’t be turned off by a home that might need just a little TLC. Basic paint, appliances and carpet are more affordable than you probably think they are, and companies are usually able to provide estimates within just a couple days so you can know for sure. You’ll be surprised at how much new carpet and a fresh coat of paint can improve your home, and make it feel like new.
- Just because a home is a “foreclosure” does not mean it’s a deal. It is incredibly tempting in today’s market of short sales, foreclosures, and HGTV to purchase a foreclosure, aka “Fixer Upper” and “flip” it into something fabulous .While I am an advocate of new carpet, appliances and paint, I am not always an advocate of buying a foreclosed property. Cosmetic upgrades are easy by industry standards, but structural upgrades can be quite costly. Unfortunately, foreclosed properties hardly ever come with a Seller’s Disclosure to let you know about structural history and concerns, so proceed with caution and do your research. A foreclosed property can be a deal, but is certainly not a guarantee.
- Begin with the end in mind. Your home will never appreciate as fast as you want it to, so don’t count on buying low and selling high as your only option! Before even purchasing your first home, consider all exit strategies. You will essentially have two options - sell the property or keep the property as an investment and rent it out. Many home owners today have been forced to rent out their homes until the housing market turns and they can sell at a higher price. Keep this option in mind when purchasing your home and you may even be able to rent your home at a price that’s higher than your monthly payments, generating positive monthly cash flow. Don’t be forced into this situation as many homeowners are today. If you buy right, you can choose to be in the situation, and have it positively affect your bottom line. Ask a residential leasing professional to provide you a market estimate before even purchasing your home. Most agents will provide a rental analysis and estimated rental price range at no cost! So, do your due diligence. Spend a little time contacting the right people, and understand that there are multiple exit strategies to explore before getting in over your head.
- It’s much harder to walk away from a property once you’ve seen it. Make sure the financials work before you even view a property. If the numbers don’t work before you view the property, then they’re not going to work after you’ve seen it. This seems intuitive, but believe you me, it is easy to lured into a beautiful property that’s just a stretch higher than you’re comfortable paying. Don’t let this happen to you. Try and keep your home-buying decisions financial first and aesthetic second. I recommend looking at properties whose numbers work, even at the list price. You can always offer lower than list price and better yet, if the numbers work at the list price, than any lower offer that’s accepted is just a cherry on top, isn’t it?