Buying a Starter Home? What You Need to Know First
New homebuyers often tell me they’re looking for a “starter home.” Does that sound like you? If so, I have some helpful advice for you.
But first, what do I mean by “starter home”? Well, the truth is that it can mean different things to different people. It could be a condominium, an older home, or even a fixer-upper. Typically, this kind of house is smaller and more affordable—think a two- to three-bedroom place.
When most people plan to purchase a starter home, they don’t expect it to have every feature they’ve dreamed of—but they know it will work for now. The goal, they say, is to move up to a better home in a few years after they’ve been able to save more.
When Buying a Starter Home
Several factors go into this approach. People looking for starter homes are typically younger buyers, often without children. They may be looking for a maintenance-free home, like a condo, or they might assume that starter homes are more budget-friendly. There are plenty of good reasons to buy a home with the assumption that it’s only for a few years, but it’s usually wise to consider the fact that it might be for much longer.
As 2020 demonstrated so clearly, things can change without warning. Homebuyers choosing a small condo with the intention of living in it for only a few years might later find themselves trying to carve out space for children due to employment challenges or market changes.
That’s why I would recommend buying a starter home if you can see yourself living there for at least five to seven years—or at the very least, two years. This doesn’t mean you haveto stay seven years if a better opportunity comes along. But if something happens and you can’t sell as soon as you would like, then you’ll want to make sure the home is practical for your family.
The other reason it’s a good idea to think in terms of five to seven years is that this is the amount of time it typically takes to make up for the cost and get a return on your investment.
Is Your Starter Home a Fixer-Upper?
The good news is that many times—once you add in association fees, taxes, and other costs—an older home that needs updating could be just as economical as a brand-new condo with all the latest design features.
When buying your first home, it’s important to consider how you would manage if you needed to stay longer than expected. An older home might offer a yard where you could expand, or extra rooms that can become bedrooms. These options give you flexibility as your lifestyle changes over the years.
As I mentioned earlier, some starter homes are fixer-uppers. And if that’s what’s in your heart, then go for it! But make sure you have an accurate estimate of just how much money you’ll need to spend in renovations. The tricky thing about home projects is that often the problems run even deeper than you initially think—meaning you could be spending thousands of dollars more than you planned.
In that same vein, consider the time commitment renovations will require. Will you be doing some of the projects yourself (or all of them)? If so, try to get an accurate estimate of the number of hours it will take you to do the projects and make sure it fits in your schedule.
If you buy your first home with the future in mind, you can protect yourself from unexpected income changes, real estate price booms, or any other outside influence. And of course, don’t discount the older fixer-upper simply because you plan to move in a few years. Plans change, and when you give this decision some deeper thought, you can adjust more painlessly in the future.
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