Get the most bang for your buck while having a comfortable place to call your own as you build equity!
Buying your first home is a major milestone in your life, and it's important to get it right. But with so many factors to consider, it can be overwhelming. That's why I’ve put together this blog with some important things for you to keep in mind to help you make the most of your first time home purchase! In this blog, I'll cover everything from the factors you should consider when you are buying your first homes to how to hire an experienced real estate agent to help you along the way. By the end, it’s my hope you’ll be armed with the knowledge you need to make informed decisions and understand how you can leverage your first home purchase to build long term wealth.
1. Consider buying your primary home FIRST
Before you attempt to build a real estate investment portfolio, you should start with the most important home purchase of all - yours! This is not just an exciting personal achievement, it’s also your first real estate experience. Learning how to manage and take care of your personal home first will prepare you for any future plans you may have to build a real estate portfolio.
Also, knowing that you have a safe place to call your own, somewhere you can recharge and rejuvenate (and a place no one can raise your rent or ask you to move out) allows you peace of mind and the opportunity to build your own equity.
Remember, you will be paying a mortgage one way or the other, either it’s your own mortgage or someone else’s mortgage by renting! So why not pay yourself!?
2. Be realistic about what you’re buying
When you begin the search for your first home, don’t let your excitement cloud your better judgment! It’s a good idea to establish a standard for what you’re looking for and what you’re willing to compromise on before you begin the actual hunt for your home.
For example, decide if you’re open to remodeling or not, and if so, set a realistic budget and timeline. If you decide you are open to remodeling, begin interviewing contractors sooner rather than later and be very clear on your expectations and payment arrangements. Ask any potential contractors to provide you with references you can contact of homeowners they’ve worked with in the past 1-2 years. The 1-2 year qualifier is critical, as time will show the defect if the workmanship is poor. More current references may not be able to give you a comprehensive review.
Also, be realistic about the qualities and characteristics of the homes you’re looking at. Older homes have very different construction components, such as knob and tube wiring vs. romex; plaster vs. drywall, etc. Victorian and Eichlers are cool and unique, however, they require special care and skills to maintain them and are more expensive to keep up with.
3. Remember why you’re doing this: to create long-term wealth using real estate
When you buy a home, you should always think about how easy it will be to sell the property in the future. A home that has desirable qualities and high demand will be easy to sell and more likely to give you a greater profit.
Keep the following criteria in mind when searching for your first home:
Bedroom and bathroom count matters! 3 bedrooms are better than 2, and 2 are better than 1. The same can be said for bathrooms. A 2 bed, 2 bath property is more desirable than a 2 bed, 1 bath. This being said, properties with functional obsolescence (like a 3 bedroom, 1 bathroom property) may be a good opportunity if you have the budget and patience for renovations to add additional amenities to the property.
Location, Location, Location! Look for a home in a safe area with good schools, a diverse local economy, and a positively growing population rate. These areas are promising for growth in the future and may experience an appreciation in home values.
A common piece of advice buyers may hear is to buy the worst-looking home in the best neighborhood and this works for some people! Those willing and able to remodel a home can take advantage of these kinds of opportunities, however, beware of unexpected expenses and competition from flippers (they are often cash buyers and can close faster).
Land is something we cannot make more of it! Homes with large lots are generally more desirable and valuable. This is especially true in the Bay Area after Prop 19 has passed in recent years. Prop 19 allows single-family homes to be subdivided into smaller lots and also allows more units to be built on one residential lot - this is a potential future money maker for when it comes time to sell.
Know how the market works. In the Bay Area, when property prices rise, it begins with single-family residences, then townhomes, and then condos. When property prices fall, condos drop first and for the most, followed by townhomes and then single-family homes. Single-family homes generally have higher and better appreciation rates when compared to townhomes and condos.
4. Hire An Experienced Real Estate Agent To Help You
If you are a first-time home buyer, your goal should be to work with an agent who can help you make sure your home purchase is a positive step towards building wealth using real estate. The right first home purchase can set you up for success and over the years, you’ll be able to buy and sell your property at the right time to upgrade your home. However, in order to do this, you need a local expert to suggest the right home, neighborhood, and time to execute your transactions.
Your ideal agent is experienced, grounded, and almost stoic.
Someone who is too easily excited or overhyped can be a potential red flag. You need an agent who will look at the home critically for you and ask important questions that you may not be considering.
Above all, you need a real estate agent that will tell you the truth. Agents work on commissions and it’s up to you to discern if they have your best interest at heart or if they are trying to push you into doing something just for the sake of their own commission check.
I hope that by following these tips you can feel confident in your ability to make a smart first-time home purchase that not only provides a comfortable place to call your own but also sets you up for long-term financial success.
Remember to prioritize your own primary home before attempting to build a real estate portfolio, be realistic about what you're buying, and keep in mind the potential for future resale value. And most importantly, work with an experienced real estate agent who has your best interests at heart and can guide you through the process with expertise and care.
If you want to learn more about exactly what qualities and characteristics you should be looking for in your starter-home, click here to download my free “First Home Essentials Checklist” which goes into detail about the most desirable and recession-proof features of an ideal first time home (aka your first successful real estate investment!).
