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First time home buyer

dukebound85

dukebound85

macrumors Core
Original poster
Jul 17, 2005
19,218
4,342
5045 feet above sea level
Any advice? This will not be my last place I buy and would like to have multiple properties in the next few years.

With that in mind, what would be the best option for a first time home buyer(who wants to have this be an investment property one day)? a condo? townhome? or a standalone home?
 
dukebound85 said:
Any advice? This will not be my last place I buy and would like to have multiple properties in the next few years.

With that in mind, what would be the best option for a first time home buyer(who wants to have this be an investment property one day)? a condo? townhome? or a standalone home?
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Buy in an up and coming area and somewhere that you can add value to. For example, where you could add an extension or modernise. If the area is about to have money invested or new transport links for example, it could be described as up and coming.
No point buying in an area that is going down hill (Detroit for example).
Also when buying always have a contingency fund in case of unforeseen circumstances.
Finally check the lease agreement with a good lawyer. Make sure there are no hidden charges or shared risks etc.
 
Do you do a lot of traveling for work? If so, I would easily recommend a condo or townhome. Until last year, my wife and I would be gone up to six months out of a year. Maintaining a home or leaving an empty house sitting there didn't seem like a good idea. So we bought a townhome which includes all exterior maintenance. Then, when we left for two months and locked the door, there was no worry about the grass ending up two feet tall, paint peeling, etc.

As someone else said, if you are going for investment purposes, find and up and coming area. But do your research, and make sure that there are solid already-funded plans for the area. When we bought our town home, we went for an area that was up-and-coming. The blighted shopping center was going to be torn down and replaced with a brand new live-work community. The nearly-condemned apartment complex next door was going to be razed and replaced with large new homes. This was our five-year home.

Guess what? 7.5 years later and the blighted shopping center is still there with only one store open (with monthly reports of action coming next month), and the mostly-condemned apartment complex still stands, although much of it is fenced-off and boarded-up with the roofs caving in. Our property values are a fraction of what they were when we purchased, and we have no way out. All we can do is hope that the plans finally come to fruition and we get somewhere near what we still owe on our mortgage so we can sell without losing everything.

I have contingency funding, but I don't want to waste it on this. That is another important note.
 
dukebound85 said:
Any advice? This will not be my last place I buy and would like to have multiple properties in the next few years.

With that in mind, what would be the best option for a first time home buyer(who wants to have this be an investment property one day)? a condo? townhome? or a standalone home?
Click to expand...

Condos are a good place to start but they can be hard to unload, I found. If you intend to rent it, that's not a problem. The things to check out before you purchase is the neighborhood and the financial health of the HOA. A neighborhood on it's way down will cause problems when you try to rent it out. The HOA we had hadn't increased dues properly since its inception which created a financial time bomb. We were lucky to have gotten out when we did.

The other option is a duplex. You live in one side and rent the other side which helps pay off the note. When this is accomplished, you're 100% cash-flow positive. Your income plus the tenant's rent goes toward your next purchase. Snowball.
 
Buy a place you like, that you want to live in.

Property is a place to live these days, nothing more. Don't look at it as an investment - it's not.

I wouldn't touch anything with an HOA with a ten foot pole either, so there goes a condo, but that's just me.
 
Beware of older places; they will have problems. You should pay for thorough inspections and then negotiate with the seller to fix them for you. The seller will have the money from the sale. You're using your savings for the down payment. The seller is required to disclose the results of any inspections, so rejecting an offer and putting it back on the market could backfire.
 
I despise anything with HOA fees. Some people like it some don't.

First and foremost you should be looking for a house you want to live in, not something you will be looking to rent out later. You could be in the house longer than expected, so make sure you like it.
 
Gregg2 said:
Beware of older places; they will have problems. You should pay for thorough inspections and then negotiate with the seller to fix them for you. The seller will have the money from the sale. You're using your savings for the down payment. The seller is required to disclose the results of any inspections, so rejecting an offer and putting it back on the market could backfire.
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Personally I find the older places are better then the newer houses. Older places may look dated but the new houses are built cheaply and are bad quality.
 
wrinkster22 said:
Personally I find the older places are better then the newer houses. Older places may look dated but the new houses are built cheaply and are bad quality.
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If they have been well maintained, absolutely, they are built more solidly. However, newer homes typically use less energy to heat (per cubic foot) than an older home that has not been "upgraded" in that regard. It can be done, with more insulation, air sealing, energy efficient windows, etc.

But my point stands: buyer beware! Older homes have a higher potential of hidden problems. Have thorough inspections done, or you could be sorry.
 
Older homes do require lots of care at inspection, but so do newer ones. I sold one older home and bought another, and both times was told by contractors, home inspectors, movers, and various folks with no interest either way that a well built older home was the way to go. They pointed out if a home is updated and in good shape after 90+ years, the bones are good and generally homes that old are made of solid wood.

Much harder to cut corners back then. Not impossible, but harder.

I agree with the concerns about HOA. There are some crazy rules that come.with some HOAs, they can restrict pets, visitor parking, even the type of external light fixtures and plants you have. Personally, when we were moving we didn't think it was worth the hassle or the possibility of rising costs.

You also need to make sure your financial documents are in order. Before you even get a preapproval, have two years of tax returns ready to go, as well as several months worth of paystubs and bank statements. The bank will need all these for your mortgage app, and they love when people are organized. Ours was a bit messy because I work on commission AND I didn't have two years commissioned earnings (though I had 7 years at the employer) and my salary was mainly carrying the mortgage, so we had to send two years worth of tax returns, w2s, etc. Our broker was able to move our app through quite fast despite the headwinds because we were on top of our documents. So an afternoon of organizing will save you a lot of stress.
 
The days when residential properties were sure bet investments are gone. The U.S. housing market is just starting to rebound after several very bad years. That doesn't mean that you can't make money buying and selling homes, but you have to be very savvy about market conditions and be willing to do a lot of research and work.

If you're looking for a place to live, buying (as opposed to renting) still makes sense for many people, but you have to be sensitive to potential resale value. A condo may be an easier place to start, since you're not wholly responsible for all the maintenance and other headaches that come with every property.If you're young, it's better to spend less on a house or condo so that you can put more away for retirement.
 
New townhouse and apt style condo developments go for a lot of money, but older ones from the 70s and 80s don't hold resale very well. I've seen a few "over 55" condo projects do poorly also.
 
puma1552 said:
Buy a place you like, that you want to live in.

Property is a place to live these days, nothing more. Don't look at it as an investment - it's not.

I wouldn't touch anything with an HOA with a ten foot pole either, so there goes a condo, but that's just me.
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I ended up making an offer on a single family home built in 1994 in a nice area and maybe 20 min from my work

It is a place I could see myself living indefinitely. Nice yard, 3bedrooms, 3 baths and a basement and no HOA. It is in a really nice neighborhood as well. The numbers on buying a condo that was cheaper but had an HOA was nearly identical to this home that was slightly more pricy and no HOA

Exciting and intimidating as I start my job in like 2 weeks. I figure I have to live somewhere and rent is pretty comparable to mortgage. For instance, a 1bedroom apart with a garage and no utlities is about 1200 in the area I am looking. This house will be ~1450 (including PMI, prop tax, insurance) and I could rent out the two rooms if I had too (couldn't with a apartment). Plus I have 2 garage spots!

Plus as a home, I figure it will be easier to rent/sell downt the road if I ever move.

I am excited and should all work out. Just scary as I don't know the future but no one does
 
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macquariumguy said:
Buy less than you can afford.
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Actually, for a young person just starting out in a career with a bright future, I would advise stretching the limit of what you can now afford, because over time, your pay will go up. Don't saddle yourself with less than you want to have, just be frugal with other expenses while you wait for those raises!

dukebound85 said:
I ended up making an offer on a single family home built in 1994 in a nice area and maybe 20 min from my work.
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Congratulations! Updates on the transaction might be of interest, if you want to share them. I have a family member going through negotiations on a home built in the 60's. The owners had put on an addition without pulling building permits. Now only the wife survives, and she is apparently willing to pay for the needed repairs, code compliance work, etc. from the proceeds of the sale. Otherwise, no deal.
 
Good luck! I close on my first house in a few weeks. Definitely make sure you get inspections done. I think technically they're optional, but you'd have to be crazy to buy a house without one. My inspection turned up everything from burnt out light bulbs and a loose toilet seat to a badly cracked and damaged sewer line. The seller's taking care of the sewer, I figure I can handle some light bulbs and a toilet seat ;)
 
Gregg2 said:
Actually, for a young person just starting out in a career with a bright future, I would advise stretching the limit of what you can now afford, because over time, your pay will go up. Don't saddle yourself with less than you want to have, just be frugal with other expenses while you wait for those raises!
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No offense, but that is terrible advice. Buying more house than you can afford on the assumption that a steady flow of raises is coming down the road is just asking for trouble.

Buy what you can afford and if you are lucky enough to have an increase in income down the road, then put the extra into your house and pay it off early. You'll either end up with a paid off house or a boat load of equity in a place you can sell and upgrade.
 
Gregg2 said:
If they have been well maintained, absolutely, they are built more solidly. However, newer homes typically use less energy to heat (per cubic foot) than an older home that has not been "upgraded" in that regard. It can be done, with more insulation, air sealing, energy efficient windows, etc.

But my point stands: buyer beware! Older homes have a higher potential of hidden problems. Have thorough inspections done, or you could be sorry.
Click to expand...

Ah yes now I understand. For example real 2 by 4's etc. Oh yeah, our electric/gas bill is through the roof (literally) Upgrading this is expensive and slow to. All this being said I would want a new house if it was well built.
 
Gregg2 said:
Actually, for a young person just starting out in a career with a bright future, I would advise stretching the limit of what you can now afford, because over time, your pay will go up. Don't saddle yourself with less than you want to have, just be frugal with other expenses while you wait for those raises!
Click to expand...

Lots of people did that in the last ten years.

Now the bank owns their home.
 
ugahairydawgs said:
No offense, but that is terrible advice. Buying more house than you can afford on the assumption that a steady flow of raises is coming down the road is just asking for trouble.
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No offense taken, but I did not say to buy more than you can afford. I said to stretch the limit of what you can afford. This advice was given when I bought my first house, and it worked out very well. You have to be smart about it. If you don't know that your income will go up steadily, then be frugal with the house you buy. There are people (I know some) who are assured of steadily rising income. They can do this with no problems down the road.

gsugolfer said:
Lots of people did that in the last ten years.

Now the bank owns their home.
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People who were smart about it are fine, however. They don't make the news. Many people got in trouble due to the terms of their mortgage rather than or in combination with the price of the house.
 
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