Purchasing a home will likely be the biggest expenditure of your life. Even still, what you envision as your forever home may change over time. Before you pull the trigger, there's lots to do and think about. It's no surprise there are lots of things homebuyers forget to consider when purchasing a house. I'm going to tell you about 3 key things that will help you weed out the lemons.
But before we get to that, let's cover the basics. When you want to buy a home, you've got to get your credit in pristine condition before a bank will loan you money at a reasonable rate. You also need to have a long-term game plan for your career. And you need a liquid buffer just in case your game plan turns sour.
If you've got all of those things squared away, you're ready to go hunting for your dream home.
3 Things Homebuyers Forget Before Buying A Home
To prevent buyer's remorse on your largest purchase, here are 3 things homebuyers need, but often forget to consider when purchasing a home.
- A marble
- A needle
- A calm mind
Marble. The first thing homebuyers forget to bring to open houses is a marble. You need a marble to test if the floors are level. You’ll be surprised how uneven floors can get after years of settling, especially for old houses. Fixing deflections and uneven floors can cost a fortune, especially if there is foundation issues. And once you notice uneven floors, you can't forget about them. You'll wind up thinking about them every time you walk around your house. They will drive you nuts!
Needle. The second thing homebuyers forget to bring is a needle. You need a needle to carefully poke around at potentially wet sheetrock and cracks. Water damage is the most common type of damage a home experiences. Leaks can come from anywhere! The roof, the wood trim above the ceiling, windows, water lines to the refrigerator, even pipes right above your living room. Don't underestimate the amount of damage that leaks can cost.
Calm Mind. And the third thing homebuyers forget is a clam mind. Buying a property can be emotional, but you need to keep your feelings in check. You need a calm mind that is willing to walk away from a house, especially in a real estate market where prices are at all time highs.
Do not start falling in love with a property with issues or that you can't afford. There is always another one that’ll pop up. And there is always plenty to choose from at any given time if you know where to look. Don’t listen to the media or realtors who make you believe in home inventory scarcity.
Related: Do Real Estate Agents Have To Disclose The Commission Cost?
Do The Math Before Purchasing A Home
Always run the numbers before buying a house. Figure out a worst case, base case, and blue sky scenario to make sure you can still comfortably afford the house whatever happens. Make sure you plan to own the home for at least 10 years.
If the home costs less than 5X your gross income with 20% down and a 10% cash buffer, you’re probably going to be fine in the long run. If you're putting down 3% because that's all you can afford, then you might be in trouble. Here's what happens if you buy property at the top of the market like I did.
Personally, I’m sick of being a landlord and sold one rental home in 2017 and reinvested $550,000 of the proceeds in real estate crowdfunding. Valuations in the heartland are so much cheaper with much higher net rental yields. It feels so much better earning income passively through REC!
As a busy father of two, I cannot be more thankful that I still get to invest in one of my favorite asset classes without having to deal with unruly tenants and maintenance issues. My family can still get to live in our favorite place, San Francisco as well.
Be A Savvy Real Estate Investor
I recommend investing in trends. And the trend of investing in heartland real estate will be here for a while. No longer is it necessary to live in an expensive and congested city to make money. That's what technology is for.
Related: Best City In The World To Buy Real Estate As An Investment
And now that you know the 3 things homebuyers forget to consider when purchasing a house, you can make smarter decisions when you're buying a house. And once you're settled into your new home, or even beforehand for that matter, you can further diversify your investments with real estate crowdfunding.
Check out Fundrise, my favorite real estate crowdfunding platform. It's free to sign up and explore commercial real estate properties that were once only available to ultra high net worth individuals or institutional investors.
Regards,
Sam