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AVOID THESE MISTAKES IN 2023:
1. DO NOT OVERPAY
As hard as it might be to admit, the type of home you want is most likely “replaceable” – and, because of that, you can afford to negotiate. The BEST opportunity is at the time of purchase, because there are deals to be had, where you can INSTANTLY buy an undervalued home that’s worth 5-15% more than the price you pay. This not only gives you additional equity, but it also INSULATES you in the event the market continues falling. After all, EVERY SINGLE property out there makes sense to buy at the RIGHT price.
2. KNOW HOW MUCH IT’S GOING TO COST
Expect that you’ll go over-budget on just about every single repair. It’s also incredibly common that new buyers will “forget” to account for all the little day-to-day minor annoyances that begin to add up – like, insurance premiums, landscaping, utilities that run more than expected, property tax increases, and regular maintenance that you’d never think about – until you own a home.
3. DO NOT TAKE ON TOO MUCH DEBT
It’s a mistake if you take on too much debt to the point where you’re reliant on rental income, a strong real estate market, or a strong job market to sustain those payments, without anything else to fall back on. That’s why I typically recommend coming in with a 20-25% down payment for ANYTHING you purchase – that way, you have a bit of a buffer in the event you need it.
4. STAY AWAY FROM ADJUSTABLE RATE MORTGAGES / SHORT TERM DEBT
Currently, most banks barely give you a discount for taking a short term loan, versus the guarantee of locking in a fixed rate for the next 30 years – so why take the risk? My thinking is that, a 30-year fixed term is going to give you the assurance that – no matter WHAT HAPPENS – your payment will remain the exact same, and because of that – you can plan FAR in advance, in terms of your monthly budget.
5. ONLY BUY REAL ESTATE LONG TERM
One report from Forbes found that it generally takes an average of 5-7 YEARS to break even on a property purchase, once you account for the costs of buying, owning, and selling. Not to mention, the process of selling a property can take a 30-60 days, in the BEST CASE SCENARIO. That’s why I always recommend to ONLY buy a property that you intend on keeping FOR AT LEAST 7-10 YEARS.
https://homeguides.sfgate.com/much-sell-house-break-even-100940.html
6. HAVE ENOUGH CASH SAVED UP
I personally keep a separate checking account for every property I own. No matter what, I’ll ALWAYS keep 3-4 months of expenses in that account for anything that comes up, and as soon as the balance exceeds that amount…I’ll just transfer the overflow into a savings account so I can invest it.
7. BE CAREFUL ABOUT TENANTS
Essentially, you’re entering a 1-2 year long business relationship with a total stranger, so you NEED to make sure you both have clear expectations and can communicate with each other to resolve any potential issues.
I hope this helps! If you’re reading this – hello! I usually expect people to skim past this, but – if you’re still here, thanks so much! Feel free to let me know in the comments section if you’re here. Also helps a ton if you hit the like button (or subscribe). Check out the newsletter, too (it’s free). Thanks, enjoy!
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