In my opinion, YES, buying a home is a wise investment and not just because I am a REALTOR®, but because I, too, am a homeowner. The key is treating your home like the investment that it truly is. It takes discipline and time for your investment to grow. And like any other investment, if you have to sell when the market is down, there is a chance that you will not realize as much profit as you may have expected.
So what are some of the key points that must be considered when investing in your first home?
- Buy Smart
- Maintain and Protect Your Investment
- Don’t Put in Your Asset in Jeopardy
But buying smart goes beyond the price paid and the loan used to finance a first home. It is also buying with resale in mind. Many, who purchased homes in the price climbing frenzy of a few years ago, snatched up any home they could after submitting multiple purchase agreements on several homes. They didn’t worry about the perfect floor plan or that the home was on a busy road or next railroad tracks or if it had a weird small room that could not be used for anything. Now, if they are faced with trying to relocate, they are frustrated that buyers refuse to compromise on aspects that they overlooked.
As a REALTOR® who works often with first time buyers, I spend time helping my them to understand the positives and negatives of the location of each property they view. I point out how something quirky like having no basement or having a hot tub built in to a bedroom could affect the resale value by limiting potential buyers. Paint and wallpaper can be easily changed but foundation, plumbing and property location are much more expensive to deal with. Oddities it a home can drastically affect value when it is time to sell.
Lastly, buy smart by determining whether equity can be built with good old fashioned hard work! If the home hasn’t been updated, a good sprucing up could raise its value. A house that has an unfinished basement, could build equity if it can be done at a reasonable cost. Don’t take shortcuts and avoid permitting because that can be costly if you go to sell. Is landscaping your forte’? Look for a home with a yard that can be upgraded over the years. Just be frugal and realistic in what your resale will be in the end.
Beyond a smart buy, maintenance is essential as is proper insurance to be certain a home owner can afford the required repairs should the unexpected happen. Time after time I have to bear the bad news when presenting a market analysis at a home where the interior and/or exterior has not been repaired or replaced in decades. These homes are not worth what a neighboring, updated home is worth. Doing several projects over time allows a homeowner to enjoy the improvements while retaining the property value. Likewise, not insuring a home properly can be a huge risk. Worse yet, are the homeowners that make a home insurance claim and receiving payment for a repair but opt to use the money for something else.
Finally, it is important for a homebuyer to not put their investment in jeopardy. Many of the people who lost their homes in the market downturn put their homes in jeopardy but taking risky loans against the equity. Some people took home equity loans at reasonable rates but didn’t use the funds to improve their home. Some of these loans were at very high adjustable rates and as the payment rose, the homeowners just couldn’t make the payment. When I was growing up, I remember learning to never take a risk with anything you couldn’t afford to lose. I think a home falls into this category.
Like any investment, a home’s value will fluctuate. But a house is unique as an investment because it serves a dual purpose: It is a your place to live as well as a way to increase your net worth. By using the money that would be paid for rent and putting it toward a house you can afford with a plan to protect and maintain your property, a home purchase is still a good investment.
Copyright 2010 Teri Eckholm