Top of the morning to you friends,
Earlier this month, John Connor of www.mymodernhome.net reached out to me and 36 other experts to ask for my advice as he was writing a piece on on first home buyers/investors advice. I jumped on the occasion as I thought it was a great opportunity to share my tips with John (thanks again John!) and his audience but as well with my preferred audience – YOU – since you may be looking at your first home as we speak.
Here were my tips to him :
- Total cost of ownership
This one is a major one, it is so easy to fall in love with a first house that you just want to go for it and make an offer.
Take the time, breathe, and make sure you have everything taken into account: Can you actually afford the house? What will be your monthly mortgage to the bank?
Will the house need maintenance – repair the roof within two years? Will the co-housing association refurbish the facade anytime soon? Does the house need immediate refurbishing?
What about the furniture? – If it is your first house, it is easy to fall in the trap of buying all new: new bed, new furniture, new decoration,… either take it slow with purchases or deduct a provisional amount from your budget to allow for these purchases.
And let´s not forget associated “minor” costs: Property insurance, taxes, homeowners association dues, higher electricity and water bills.
- Go to your bank first
This is what I personally have done with my first apartment, the idea was to know how much house/apartment I could look for on the market and target my searches. I was surprised to hear that not all home chasers were seeking mortgage approval prior to going to visits! What if they found a dream house and found out they could not afford it? What a disappointment!
- Check the market trends
If possible, time your purchase well so you are in a buyer´s market instead (offer of housing is abundant) of a seller´s market (scarce housing market). This typically varies within a year or there will be long-term trends showing up depending where you live. Example: In Oslo, there has recently been a little downturn (7,1% down since April) on the real estate housing which makes it more of a buyer´s market for now, and it is hard to see which trend the market is going to take next (stabilize, up, down?). In Spain property prices have increased by 4.7% in 2016, even reaching a 9% increase in Madrid for example!
- Plan for the future
Is this house your final destination or is it a first purchase/investment? What would be the resale value in a couple of years? You are maybe single or a couple and plan to either get a partner or kids. Will you want to stay in the same area or move somewhere else? This one is really long term but it might be worth considering it.
Crucial! Go to see the house with a friend or a family member that is experienced in inspecting all sorts of technicalities. The house will be at its best when on sale and unfortunately there might be hidden flaws in the house covered by paint/carpet or access (humid basement?). Check the faucets/every corner of a room, the ceilings, look at humidity spots in the bathrooms, is the visit on a quiet day or on a busy evening? Here is an inspection checklist and an additional “beyond the inspection” checklist (I particularly vouch for item 6!)
Other excellent points that came through John´s article were the following :
- “Location, location, location” – see point 5 in the infographic.
The Number 1 rule in real estate investment! And as Ryan Fitzgerald mentions: “You can change the home conditions at any point – One thing you can´t change is the location”. This one did ring a bell as I had heard it before as well in “Chasseurs d´appart“! (my favorite tv-show when I was in France!)
- Put together a team – point 6 in the infographic
This is definitely a great one and joins partly what I mention in the Inspection point. Gather your team: Your banker, parents, friends, experts you know, real estate agent, the Bigger Pockets community,… you can benefit from their knowledge and experience about mortgage rates, best areas to look for, inspection tips,… I have set up my own teams and it has helped me greatly!
Bringing it all together
There is a wealth of knowledge in that article but to make it short here are the top 10 tips from the 37 experts :
Top Tips For First Time Home Buyers
#1 Plan & Budget For The Future – 15 votes
#2 Don’t Borrow The Maximum – 10 votes
#3 Educate Yourself – 9 votes
#4 Budget For Extra Costs @ Closing -7 votes
#5 Location. Location. Location. – 6 votes
#6 Put Together A Great Team – 6 votes
#7 Get Pre-Approved – 6 votes
#8 Pay For A Home Inspection – 6 votes
#9 Embrace The Ugly – 4 votes
#10 20% Down Is Huge – 3 votes
Buying your first home will be for most of us the most expensive purchase (or investment?) we will ever have. Even though a lot of emotion is involved, it is important to make a well-informed decision before you sign on the line which is dotted. Thanks to John you have now access to the advice of 37 experienced flippers, real estate experts, agents, landlords,… this should definitely help you in your house-hunting journey!
So, good luck to you and of course comment below if we forgot some crucial aspects!