In some areas home prices have plummeted to incredible lows. The opportunity to buy your own home, sans a hefty mortgage, own a rental, or turn a profit by ‘extreme home makeover’ seems at your fingertips, but what do you watch out for and how do you get started?
In this series of articles, I’ll share personal experiences as we walk through the opportunities available to homebuyers, pitfalls to avoid, extreme home makeover on a (really) tight budget, and the post-game breakdown – what to do after the money is spent and remodel is finished.
First, let’s outline opportunities available.
For the first time in years it is possible for you to think of owning your own home in a year or less.
You could own a rental, managing an extra $300 to $600 bucks a month.
You could go green, and recycle an old fixer-upper by the ‘this old house’ method, turning it into a desirable home and giving you a 50%-100% return on your investment.
$10,000 to $30,000 homes litter the market. Duck outside work during your lunch break and buy…a house? If you can figure out how to make it happen, sure!
If you have the 10K, excellent. Skip this next section. For all the rest of us, we don’t have 10K sitting in their hip pocket, blissfully waiting for that lunch hour real estate transaction, yet we would still like to take advantage of low real estate prices and own our home. Do some looking at your budget—are you spending less than you make? Are you able to put aside $200-$300 a month for the next year? (No way! There are ways to trim the budget. For ideas do a google search on budgeting) Do you have little to no debt burden? (I wish! Find ways to hammer down your debt by doing another google search.) Many financial wizards recommend against taking on debt—I agree—but if you are spending less than you make and have little debt burden, maybe a short-term loan could be a tool to help you buy your own home. Many of us take on massive debt for a home purchase, with a mortgage eating up to 30% of our salary (or more) each month. Doing the research, knowing your budget, and making a plan for paying off a small to midsize loan for your home could be a gold mine opportunity for those hoping to avoid a crushing mortgage. Many banks have special offers – 0% APR for 6-18 months for certain loans from 5K-20K. Ask your banker or loan officer how they can help, and before you ever ask for the money, make a plan to pay it off.
I don’t recommend a traditional mortgage for this particular venture—for one thing, many banks do not want to loan less than $30,000 on a mortgage.
Now that you have the something to jingle in your pocket, what next? Do a real estate search on your local area with a free real estate search engine—pay particular attention to short sales, foreclosures, HUD homes, bank owned properties, estates, or properties that have been on the market for more than 12 months. The home I bought last month, I looked in the 10K-30K range. I didn’t have 30K, but at this price range, when dealing with banks or foreclosed properties, dealing in cash, the price flexibility increases dramatically. Don’t give the asking price. This is an open air flea market, and you as a cash buyer hold some serious clout. The last two homes I have bought I have paid 20-25% less than the asking price.
Know what you are looking for.
Are you looking for a rental property? How close is it to a major highway—does it have easy access to a central city location? Are there colleges or universities nearby, (you might attract students as renters).
Are you looking for your own home? Remember, in this price range, you probably won’t find your dream home, but you could find a suitable home—and one that you could own. Make a list of those things that are non-negotiable for your own needs, and be flexible on the rest.
Are you looking for an investment property that you can remodel and sell? Look at the location—what are homes around selling for? What part of town is this house?
I’ve briefly outlined the broad market, thrown out a couple of ideas for financing, and given some tips on goals. In my next article, I’ll talk about where the rubber meets the road—or hammer meets the nail—and what to look for, (and what to avoid!), before signing papers.