October 8th, 2013
Are starter homes just for young people?
Are starter homes the same as first homes?
Are starter homes always condos or townhouses?
We hear a lot of questions about starter homes. And as we’ve blogged, it is still cheaper overall to own a home than to rent right now. But if you don’t have a lot of savings or income, does this mean you should buy the little condo and live there for a year or three until you can buy a larger home?
Then, what do you do with your starter home? Should you sell it or rent it out?
Let’s back up.
The number one question you need to ask yourself is if you want to be a homeowner. It doesn’t matter if it makes good financial sense. Some people like having someone else be responsible for repairs and maintenance. When that water pipe starts leaking, you the homeowner will need to hire a plumber to fix it.
Once you’ve answered yes, then it’s time to find a reputable loan officer and get preapproved for a loan. That will tell you the ballpark of what you can buy. Remember, though, if you buy a home with your maximum loan amount, you will be house rich and cash poor for awhile.
This may not be a bad thing if you don’t want to move again for awhile, but keep in mind you won’t be going on many vacations and will have to get creative with inexpensive furnishings. If you have very young children, you can use a room as the toy or play room instead of furnishing it.
If you want to buy a starter home, live in it a few years, and then sell it, make sure you buy a house that is affordable, otherwise you will have difficulties selling it to someone else looking for a starter home.
It’s also a good rule of thumb to buy a house with at least two bedrooms if you want to resell the property.
If all you can afford is a one bedroom condo, you may want to look into renting it out when you’re ready to upgrade.
Here’s where we get into the chicken or the egg scenario. A great Realtor will be an expert in an area and help you find a great property but you should know the areas where you’re interested in buying.
So spend some time driving around and looking at open houses. You’re not really there to look at the houses (although, go for it and get some great decorating ideas). Take the time to meet the Realtors and find out which area is their expertise.
Then get referrals from friends. Don’t rush this. Your Realtor is your partner, and you want to feel comfortable and have a high level of trust.
Your home, ideally, should answer the question of “Is this good for me” in four areas:
You may not even be thinking of kids right now, but when you buy a home, you should. Why? Well, you may have kids in the future and it also impacts the resale value of the house.
Don’t hesitate to look at new construction as well. There are some really good deals going on because building companies need to sell existing homes so they can finish building the rest of them
Are you ready to buy your first home? Now is still a great time to buy before the end of the year.