Right now the housing market seems to be on the upswing. Friends of ours bought their condo in 2010 for $118k, did nothing to the place besides a fresh coat of paint and regular upkeep, and they just sold it for $169k. They were able to use this money to purchase their long-term home as they prepare for the arrival of their first child. There was no intention to live in this condo forever; they viewed it as an investment. With so many young couples and young professionals browsing the market, here are 4 things to consider when buying your first home:
As Derek mentioned in one of his popular articles, “$250k to Raise a Kid? I Don’t Think So!“, in 1950, the average home size was 1,000 square feet but today that average is 2,600 square feet! Our home is 1,200 square feet and I’d say it’s been the perfect size for our family of 3 (almost 4). No rooms are wasted and we are somewhat forced to utilize our space wisely since we can’t accumulate a bunch of stuff. The bigger the house, the more stuff you can fill it with. My parents jokingly call one room in their home the “sitting room” not because it’s where you relax and catch up when people come over but because it’s where everything they don’t want to deal with right way “sits.”
Also, how many of you grew up in the first home your parents ever lived in? My parents rented first, then lived in a tiny shack for a couple of years, and then purchased the home I lived in for 10 years before moving for my dad’s job. However, young buyers these days tend to think their first home needs to be as nice as the one they grew up in. That’s likely not what our parents started out with!
I’m learning this from experience. Having a smaller mortgage makes paying it off early seem way more doable than it would if we had a bigger number to deal with. We would have spent an additional $60,000 in INTEREST alone if we had only made minimum payments to get where we are now in just two years. My husband and I did the math and we learned that if we just make a few extra payments each year we can be DONE with our mortgage before our first child’s 10th birthday. That sounds wonderful to me considering I’ll be 27 this year and my parents and my in-laws are still making payments on their mortgage as they near retirement. When buying your first home, consider the payments and how quickly you can pay it off. It could make all the difference.
3. First home = trial and error
After two years of living in our condo, I’ve learned what I want and don’t want in our future home. I wouldn’t know these things if I hadn’t experienced them first. All I’ve known prior to our current place is the college dorm and apartment life so that didn’t give me much insight on kitchen set up or bedroom locations.
I’ve learned that I would prefer a place with a laundry room on the first or second floor, not in the basement. It would be great to have a garage some day. I would NOT have the bathroom located in the kitchen and the pantry around the corner by the living room (why did they do that??). My husband and I are often visiting friends or family during the week or weekend and at this stage of life we don’t want to be spending our entire weekend working on house maintenance. With young kids, I’d rather use the time I have after they go to bed to relax and catch up with my husband rather than hustling to get yard work done. In this stage of life, it’s worth it to pay the condo association fee to have someone maintain the outside of our home so we can spend our time doing things we actually love to do.
Our home is very close to a university and prestigious teaching hospitals, which means that the housing market is competitive. We are able to visit family for a weekend and rent out our home for $1,000 when there’s a big football game going on. When we were house hunting, we had no choice but to view a home the very first day it listed and decide right then if we were going to make an offer along with 6 other offers already made at or above asking price. It’s certainly an investment opportunity. When we moved to Calgary for 6 months for my husband’s job, it was so easy to rent out our home for that short time. Our hope is that we will pay off this mortgage early, rent it out, and the income from renters will essentially be making additional payments for the mortgage on our next home.
Don’t get caught with a huge mortgage just because you want your first home to be THE home. Consider starting smaller and/or starting with something that can be used as an investment down the road.
When buying your first home, did you buy a starter home or a forever home?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.