Well, my friends, we need to discuss the topics that are usually not covered in similar articles.
Forget about math for while, and instead answer the following questions:
- How many years do you foresee yourself living in the property? This long-term planning is crucial for your financial security and peace of mind.
- Do I have a job that requires a prolonged business trip?
- Is my job stable enough, or are my business skills in relatively high demand so that I can stay in this area for a long time?
- Am I ready to incur the upfront expenses if I buy the house (down payment, settlement fee) and use my savings? (Hopefully, you have the emergency funds and won’t touch them.)
- Am I planning my prospective house to appreciate over the years? Did I conduct thorough research on the housing market in the chosen area in general? Does it have the potential to deteriorate due to political or economic changes?
- Am I ready to be a homeowner and face all maintenance issues and expenses?
Some of you may not be ready to answer specific questions. It is understandable. I'll be able to help you.
Let’s start with question #1.
If your time horizon in the chosen neighborhood is unclear or relatively short, please keep in mind that there's no rush to buy. Renting can offer a comfortable and low-pressure way to test the waters and see how your situation evolves.
Some people make a mistake when they need to move to a new place and don’t know if they will be comfortable with everything there. It makes perfect sense to rent first, get familiar with the neighborhood, surroundings, shopping, neighbors, and schools (if you have kids), and only then make a decision about whether it makes sense to buy a house.
Question #2.
Why is this so important? If you are a house owner, your property should be maintained 365 days a year. It means any possible roof leaks, humidity in the basement, electrical power failures (I just had one right on the electrical meter attached to my house), possible floods, storms, and even hurricanes. You can’t afford to expose your property to all those misfortunes, and no one is watching your property.
Don’t you think that renting is safer with fewer headaches?
Question #3.
My first mistake as a townhouse owner years ago was the hope that my wife and I would have our jobs for a long time without interruption. We were out of luck when we both lost our jobs almost simultaneously due to the recession. I had to deliver pizza for nearly two years while I was learning my new profession, and my wife had to get multiple side jobs to keep our bills paid. Needless to say, we did not have any emergency funds (and were unaware of the need for them). This experience taught me the importance of job stability when considering homeownership.
So, please don’t repeat my mistake. Ensure your skills are in high demand, and you may secure another job nearby, potentially without the need to relocate. Having emergency funds can provide a safety net in case of unexpected job loss or other financial emergencies.
Question #4.
My point is that buying a house typically requires a significant upfront investment of cash. The amount of money varies. If you are a first-time buyer, in the U.S., you have the privilege of putting down a down payment of only 5% of the house's cost. However, as a standard requirement, you have to be ready to put down at least 10% or even 20% (if your credit score is not so good) of your after-tax money.
Could you make sure that you have performed the calculations correctly? Don’t strip out your savings entirely. You may regret it later. Perhaps, do not touch your emergency money (6-12 months of living expenses).
Question #5.
My son just bought his first house. Expensive but in a nice area with good schools. When he was considering his options, he included the potential increase in value as his first priority.
So, I have asked him question #5. He said that the house has been there for many years. So, what was the point of talking about the future value (who knows when)? I said, 'Buy the house and enjoy it, and don’t worry about its value in the future.'
If you want to buy a property that will be sold in the near future with an appreciated value (as I did last year), please make sure that your due diligence supports this goal. Location, location, and location – the priority when buying a house.
Question #6.
Many people dream of owning a house. It’s a typical American dream. Unfortunately, many of them become frustrated when faced with ongoing maintenance problems, which require attention to things they never could have imagined.
The house I sold in one of the southern states taught me that better due diligence pays off in the long run. When I was planning and performing various calculations, I had no idea about the additional expenses (and headaches) I would incur.
Beyond standard maintenance (plumbing, lawn moving, etc.), I had to take care of trimming the palm trees that were on my property (once in 3-4 months, $250 each); replacing one palm tree ($1,500) because the small pests have decided to create the nest inside the tree; pay for 365 days protection against ants, $200/year); cleaning the tiled roof at least once in 3-4 months (humidity made it look dirty, $250 each), and having a headache with a local Home Owners Association that was like local police trying to see what can be done to hurt home-owners (something like you have to paint your driveway, your grass is too dry!).
Don’t get me wrong, being a homeowner has its rewards and moral satisfaction. However, it doesn’t hurt to spend more time on due diligence before you decide to buy or rent.
DISCLAIMER.
This site is for informational and educational purposes only and should not be construed to constitute professional advice. Nothing included here shall be a solicitation or endorsement. I am not affiliated with, nor do I receive compensation from, any company. I will utilize my extensive notes from various articles. If I did not specify the source, I would like to thank all the authors whose thoughts I have incorporated into these pages.
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