April 23, 2014
A starter home is a bad idea on many fronts. Why should you avoid it? Alternatives?
A starter home is a bad idea on many fronts. Why should you avoid it? Alternatives?
You should avoid a starter home for some of these reasons, why would you buy a home that you really dont want to live in and are unhappy being in, you would likely spend alot of money to try and make it closer to your dream home and not get very much of a return for putting more money in to your home, second you do not want to only buy a house for a few years, you want to live in a house for at lease 10 years and try for longer. When you sell the starter home you will have to pay a 7% sales charge if you use a relator. A better way to go is to rent a place that fits in to your budget or under you budget and save up as much as you can to buy that dream home you will live in for hopefully the rest of your life, it will be cheaper to rent and will be less of a head ache if you only live places a short amount of time.
Well said, Garrett. Let’s review.
The starter home is pushed hard by the Real estate industry. Why? They need you to buy and sell homes so they can make you money. Is it a good idea? For them, yes. For you, no. Why?
Buying a home you don’t really want just so you can live in it a while before moving up to the home you really want will be very expensive and ultimately will not bring you what you want in most cases (the home of your dreams). Why?
Home ownership is expensive. Moving in, maintenance, fixing things up, and ultimately selling it will cost a great deal of money. How much? You can expect to pay roughly 10% per year based on the value of the home. $200,000 home? About $20,000. In the vast majority of cases, you are not going to recoup that when you sell no matter how much your home appreciates over that time period. So what should you do?
Keep renting, keep saving and when you have 20% to lay down on that home you really want, buy it and live in it for a long time. Stay away from the starter home!
I do not agree, while in theory you’re 100% right, I think that’s actually my biggest mistake as a young worker. To embark in such a purchase and having to make mortgage payments every months will impact your spending habits and will force you to save money every month (through the equity of the house) and that very same house equity will follow the real estate market helping you to buy the next house. If you don’t, I suspect that in 90% of the case you will find more excuse not to save the required amount that month. Unless you are a very mature young worker with an exceptional will power in most case the individual that buy the starter house will be better off 10 years later, simply because it will shape his future choice as well.