For most Americans, education and a house are the largest expenses in their lifetime. Both are viewed as investments. Education is an investment that hopefully pays off in the near future in either salary or a career that one wants. A home purchase, on the other hand, serves both a utility purpose (a roof over your head) and a potential to return money when it is eventually sold. This article covers some of the common things to look for (and not to look for) in homes in the author’s opinion.
One of the largest mistakes first-time homebuyers make is to focus on small cosmetic issues that are easy fixes. Don’t like the paint on the walls? Carpet dirty? Yard not manicured? All of these small cosmetic issues are easily fixable in a weekend and with very little upfront cash. The important things that can’t be changed are location, square footage and (usually) the layout.
Location is probably the most important to look for in a house. What is important in a location, however, is different for everybody. This author prefers a low commute over having restaurants and bars around my home. Do you use public transportation or own a car? Do you have children? These questions would determine whether you want to live near a major highway, live near a major transportation hub or even if you should care about the school systems for the place.
Another pitfall that happens to first-time homebuyer is to only look at the mortgage when looking at the cost of a house. If you rent for $1,000 and a mortgage only costs $900, it could look like you can save money by owning a house. This number doesn’t include a lot of the costs for home ownership. The largest costs that aren’t included are insurance, taxes and maintenance. When adding all these in, the cost for ownership are much higher. Are there condo fees? How about parking? Make sure to include all of the costs of ownership in before making a decision
Homes are often thought as the largest investment for a family. I would like to caution against this thinking and encourage to look at it more as consumption. Your home may go up in value. Your home may go down in value. It is very difficult to predict which direction the markets will turn, even for the savviest investors. To compare how well the investment does, it is important to compare how well the investment would do in comparison to other investments. Putting down $30k with a fantastic return may seem incredible, but remember that the $30k could also be invested in many other assets, such as stocks or bonds.