The Baby Boomer generation constantly keeps talking about a ‘starter home’, just like the one they bought when they were younger – a humble home where they could settle down as a couple before moving to a bigger house that was perfect for an expanding family.
However, today’s economy is not as ideal as it was back then and many people struggle to get a decent deposit for any kind of home.
Should they be buying a starter home and sell it later?
That’s the big question!
Or should they just buy the home that will work for them in the long term?
Here are some pros and cons of buying a starter home:
Con: homeownership is never a sure thing
We live in a very fast-paced world and this affects home values.
Things are not like it was for the generation before where you got married, settled down and stayed in a job forever!
Now people choose to be single for longer, they might get job transfers and they might even go overseas. This means that homeownership might not be part of the plan.
You might end up being a landlord or having a house that is running at a loss!
Pro: you can build stability more efficiently
Many people experience a sense of stability when they buy their first home and through this, they grow through the lessons they learn.
People often feel more grounded and rooted, taking the opportunity to reflect on what they really want from life.
After making a few changes to your nest and having a few friends over, homeownership might become something you want to invest in forever.
Con: buying twice means moving twice
Not only can this be very annoying, but you might end up losing money in the process. There is no guarantee that you will be able to sell your starter home and get the profit that you want for a deposit on a new home.
It might be better to save up for a larger house from the minute you decide to move so that you avoid all the extra costs as well, like title insurance, inspections, and a handful of home loan fees!
Even though renting for a longer term may seem wasteful, it might just save you in the long run.
Pro: build equity sooner
When you get your first home, you might start realizing that it has valuable equity potential.
After making a few changes to the house and doing a few upgrades here and there, you’ll soon find the value of your property increasing and you can use that as a down payment for your next home.
However, this requires you to commit for at least 5 years once you’ve decided to be buying that starter home, but it can be the first step to buying your dream home.
Con: you may spend more than you planned
Property taxes and mortgage payments are not the only costs that are associated with buying a home.
There are other expenses that you will have to consider: you might want to buy new furniture, paint the walls, redo the kitchen or bathroom and pay for landscaping improvements.
All of this will cost you a few bucks and if you hire the wrong contractor you might end up paying even more for the mistakes that they make!
A lot of parts of homeownership is trial and error and you might avoid it by purchasing a long-term home from the start.
Homeownership is a personal choice and whatever choice you decide to go with, you should do your research and be well informed about the risks.
Whether you’re buying a starter home or a long-term home, each will come with its own set of challenges that you need to take up, depending on your personal situation.
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