As the first couple weeks of 2017 go by, many of us evaluate our 2017 resolutions and goals. Whether they are social, monetary, lifestyle, or health related, it is always good to evaluate if they are realistic and determine how to achieve them.
Many start the year with the goal/resolution of buying their first home by the end of the year. I thought I would help those of you considering this resolution by providing 3 questions that you should ask yourself, that are not financially related, to determine if it's right for you.
1. Do you see yourself living where you plan to buy and is that lifestyle you want?
- It may seem obvious but it certainly can’t be missed. Make sure you have spent ample time in the areas you are considering and neighborhoods beyond. This will give you an idea of what it is like to genuinely live in the area. When we buy a home, we are not just buying the land/structure, but we are buying into the neighborhood, the parks nearby, the local coffee shop, and school district. All of these things tie into the lifestyle that you will have when you move into a home. For example, do you want the downtown high-rise lifestyle or a more private rural environment with lots of room for your pets and classic cars?
2. Do your long-term (roughly 3-5 years) goals involve staying where you plan to buy? What’s next?
- Once you have determined that you can see yourself living in a specific area(s) you have to decide if it is somewhere you can live long-term. Buying a home is an investment. With patience, homes can bring individuals large amounts of wealth. There are costs involved with buying and selling homes, therefore it is very rare to purchase a home, sell it in 6 months, and make a profit. Typically, it can take 3+ years before homeowners see enough equity built up to motivate them to move. Therefore, where you are deciding to buy has to be somewhere you can see yourself long-term.
Having an exit strategy is also something I recommend and discuss with my clients. Do you plan to sell when you move again or rent out the property? Depending on your next steps, you may need to evaluate the homes you are looking at, differently.
3. Are you willing to undertake the responsibilities of owning a home?
- Lastly, as a renter, you have the luxury of calling your landlord as soon something goes wrong such as a broken washer/dryer or a leaky roof, and have everything repaired and paid for. As an owner, you will have to take on those responsibilities. On average it is good idea to set aside roughly 1-2% of your home’s value towards repairs/upgrades per year. For example, a new washer/dryer can cost upwards of $1,200, so planning ahead is key. If you own a condo, you would need to plan for special assessment from the HOA. Fortunately, most HOA special assessments are less than a couple thousand but they certainly can be much higher; this is something I will go more into detail on in a future post.
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I hope these questions helped give you some insight as to whether purchasing in 2017 makes sense for you. I work with many first-time home buyers and it generally is much more attainable than most think. It is just a matter of breaking down the process and planning accordingly. I typically encourage my client’s to meet with me to 6-12 months in advance to plan. Feel free to call or email me with any questions, I am always available!
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