- No.1 - Space
- No.2 - Budget
- No.3 - Goals
- No.4 - Location
- No.5 - The housing market
Starter homes are ideal for people who are tired of renting but have not found their forever home yet.
It is an easy way to get your foot in the door if you are planning on buying property because it is a home that you can afford to buy at that moment in time.
There are a lot of advantages when buying a starter home, like not being stuck to it for the long-run and renting it out once you have found your forever home.
There are, of course, a lot of disadvantages as well. They tend to be smaller and it remains an expensive investment.
Here are a few things to consider before buying a starter home:
No.1 – Space
Starter homes are small in space which is why they are so affordable.
You might need to compromise when looking for a starter home but be careful that you do not compromise too much. You do not want to end up with not enough space to live.
A good idea would be to have enough space for the next three to five years. When you outgrow the starter home, you might not find your forever home immediately, so you want to stay there as comfortably as possible.
No.2 – Budget
Just because a starter home is cheaper than a bigger house does not mean that it always makes financial sense to buy it.
You need to keep in mind what the mortgage will be every month as well as the registration costs, property taxes, insurance, and maintenance costs.
It could end up becoming a money pit and you could be spending more than you intended on. And, depending on the age and condition of the house, you might have to do renovations that cost even more money.
No.3 – Goals
Before you buy a starter home, you need to determine your goals for the next few years.
Do you intend to stay there for at least five years or are you planning on moving? Do you want to grow your family? Are you planning on changing jobs?
You cannot predict everything but it is important to plan as far into the future as possible. Your goals will determine the size of the house you buy and by mapping them out, you can determine what your financial situation will be by the time you purchase the house.
No.4 – Location
The golden rule in real estate is location, location, location.
When you buy a starter home, you have to be buying with reselling it in mind.
You need to ensure that the resale value of the house is at its prime when you decide to sell it again. This is why location is so important.
A lot of young buyers buy starter homes that are close to work, restaurants, and nightlife spots. It should suit your needs at the time and also keep in mind what other buyers might want out of it.
No.5 – The housing market
You must consider the state of the housing market before you start buying.
Are the houses in your city on the increase or are they falling? If the housing market is strong and prices are increasing, then it is a good indication when buying a starter home.
It allows homebuyers to get in at ground level and there is a higher likelihood that you will make a profit when you decide to sell.
However, if the housing market is not so strong, then it might be better to think twice before jumping in. It might mean that the house will likely depreciate and you might lose the money that you invested once you try to sell at that time.