A little over two years ago I purchased my first home. But before I dipped my toe into the enraging enigma that is the housing market, I had a lot of hesitations. Mainly I didn’t want to sacrifice travel and adventure, or the possibility of it. The thought of just living in this house and doing nothing else until the end of time made me panicked, and if that was the only way to become a home owner I don’t think I would have. So, I started looking at it a different way – my sister was the one who really made me realize this when she reminded me “you have to pay to live somewhere – might as well be putting towards something instead of throwing it at a landlord”. Wise words sister. But I still had hesitations – a mortgage is a big chunk of money. I was searching for something different. So when a house split into 2 units came on the market I jumped at the chance to check it out, and then went home and made several spreadsheets with possible financial outcomes. No matter how I worked it, this property would give me the option to have a large percentage of the mortgage covered by renting one of the units. The thought of becoming a landlord was strange as I always just imagined they were women over 75 a la Mrs. Trumbull in I Love Lucy. But the possibilities were exciting and ultimately gave me more freedom than renting.
I’m not a professional by any means … but here are my personal tips for home buying for those who still want to wander based on my brief stint as a realtor, and my personal quest which involved looking at at least 50 thousand homes some of which were actually derelict shanties.
- Your lender will tell you how much you qualify for – purchase well below this price.
Just because the lender works for a bank doesn’t mean they know what would be doable for you, and I honestly don’t think there’s any possible way I could sustain my life if I’d purchased a home at the amount I qualified for. I strongly believe this is why so many people get foreclosed on – they trust the professional and don’t actually follow their own intuition. Day to day living aside, I also feel you need to have enough money left after closing on your house to cover one of the major expenses. To me – those are a new roof, furnace, windows, or electrical. The home I got was a fixer upper (to say the least) so I’d budgeted to do a fair bit of work, but what I hadn’t anticipated was the hole I found in the basement. Yes – a hole. This was not some tiny little golf ball size imperfection; this was a ground hog size hole that lead to the entire basement having to be re-cemented by a foundation company. Before purchasing the house the company had assured me there were no issues, and that any small cracks were purely cosmetic. Well, it wasn’t, and – they have no liability. It wasn’t an anticipated expense but one that did need to be addressed. Be prepared for something to come up unexpectedly, or you’ll be spending your travel fund to fix that pesky wire which sparks when you run the dishwasher.
- Buy a property that can make you money while it’s your primary residence.
My house, while technically a single family home, is divided into two apartments. This means that every moment the house is making money. Duplexes are a great options but there are other ways to do this too. You can become a host with AirBnb which is especially lucrative if you live in an area tourists visit. I live in a small town where no tourist has ever visited on purpose, but there are still people who host in my town. Many of the guests stayed because they were visiting family and didn’t want to book a hotel, or they were on their way to an actual city and needed a stopover “in the middle of no-where”. I honestly don’t know how people pay their entire mortgage without any sort of income assistance.
You can get $25 off AirBnb by using my link – here!
- Buy a fixer upper with non-urgent issues
I think I took fixer upper a bit far with my house, but there are lots of houses out there that need cosmetic work and they’ll sell for a lot less than those with newer finishes. Embrace the shag carpet and 1970’s appliances. You wouldn’t think that a homes value would be much higher just from a few simple coats of paint and 2 stainless steel appliances, but I see it all the time. You’re paying a lot more for fixes that aren’t expensive. PSA: tile isn’t expensive. If you get a quote for a new bathroom floor to be hand tiled you’re going to pay many thousands of dollars which could be spent much better places. The supplies will only cost a few hundred and you can rent any machines you don’t own without having to invest in them. I spend around $250 for the tiles and supplies for my bathroom floor and shower. Homes with non-urgent fixes are great because you can save up over time and take care of issues as you can. If your dishwasher doesn’t work, just wash by hand until you have the funds to repair or replace. Not only will a fixer upper leave you with more money initially, but you’ll instantly see your home’s value get a little lift. Also keep an eye out for local outlets that sell discounted supplies. I live close to a habitat humanity resell store – any left over supplies from habitat for humanity projects are taken here and sold at insanely low prices.
- Buy where there is a strong rental market.
If you can’t commit to a home because you’re afraid you want to take a year off and travel, make sure you buy a home in an area where rental potential is higher than your mortgage. Knowing you have the ability to leave for extended times and not lose money is key. You’ll want to make sure the rental potential not only covers the mortgage, but also any property management expenses.
- Furnish as you go.
Once you have your new place it’s tempting to want to run out and buy all of the things you need so your new place looks finished. This is a dangerous place where you can burn through a lot of your savings. Only purchase essentials. Our versions of this might be different, but I strongly believe a dining room table is not a necessity. I eat half my meals on my comfy couch anyway, so dishing out for a table after spending so much on my house wasn’t an option. I found that when I didn’t go out and seek things – most of them came to me effortlessly. A table was gifted from someone who was getting rid of one, a decorative wall mirror was found on the side of the road. I’m glad I didn’t buy things that I ended up collecting over time without expense. Scouting out yard sales for the non-essentials is a good place to start.
- Your first home should be an investment property
I knew my first house wasn’t going to be my dream home – or really anything close to it. So I really wanted it to be something that set me on a good path. To me, an investment property means different things. The first is buying a home drastically under value. Whether it’s a foreclosure or simply a seller who is selling urgently. The second is a home where the rental potential is much higher than the mortgage. Either of these situations will set you on a good path in the future, as well as leave you open to possibilities of selling or renting your house if you decide you need to venture on.
- Stop having short term vision
This article is something I agree with on a lot of points and the overall focus is long-term vision. The article discusses the lifetime costs of owning vs. renting. For me I felt like in the long term owning a home would open me up to more options for travel. The year I bought my house was tight, but now that I have a tenant I have more money going into travel than I could before.
To sum it all up – you don’t have to chose between travel and home ownership. But, you might have to buy with a different mindset and make specific sacrifices like opening up your home or renting a room. My ultimate advice for anyone looking to consult professionals but always trust your own ideas and intuitions!