Answer by Julie Gurner, doctor of psychology, multiple time home owner, on Quora – the knowledge sharing network where compelling questions are answered by people with unique insights.
I have invested, done some flipping, and tastefully renovated old homes. I’ve bought (and sold) a lot of homes (my mother says I buy homes like others buy shoes), and these are tips that have worked for me.
- Buy a home you can easily afford. A lot of people buy homes at the top of their range, and that’s a huge mistake for most…never be a paycheck away from foreclosure or struggling.
- Find a house with bad aesthetics and fantastic “bones.” Buy the house that looks decent on the outside but has internal superficial ugliness – gross paint, carpets, etc.. As long as the major systems are fantastic (plumbing, electrical, roofing, etc..), superficial things can be fixed and will add instant value.
- Buy the crappiest house in the nicest neighborhood you can. It will always sell for more than what you paid for it, if you put in some elbow grease.
- Get an amazing home inspector, and follow him/her around with a clipboard asking questions and writing down every little problem. Use it for negotiations, and later as a personal checklist of things to take care of.
- Be sure to get a “fixed” interest rate with your mortgage…and have great credit. No matter what happens in the market, you’ll be grateful.
- Know your market. Go to Zillow and see what houses have sold for in your area, before making an offer…know how competitive the market is, so you know how competitively to bid – how long do homes stay on the market? I’ve offered prices $100K less than ask and gotten homes, but also gotten homes by offering the asking price.
- Look at the crime map for your area. There are beautiful cheap homes out there in neighborhoods you’d never want to live in. Don’t be suckered in.
- Don’t ever buy anything with an HOA. (additional fee for living there) – you can never get rid of it, it can go up, and you can never truly pay off your property.
- Think of additional income streams. Does it have an in-law apartment or space you could rent out or use for Air BnB? Could you rent out a room or two if you were in a jam?
- Have enough money down that you will not be paying PMI (mortgage insurance)…this can be hundreds a month that doesn’t even go toward your balance. Your payment per month will be far lower.
- Renovate…this is not HGTV. If you buy something completely finished, you are likely wasting a ton of money, and overpaying. You can usually have everything you want for a price you can afford if you’re willing to do the back end of it.
- Have a list of things that are “must-haves,” things “that would be a +1 but wouldn’t be dealbreakers.” Know that going in.
- Don’t be “wowed” or turned off by the appearance going in. They hire professional staging companies for a reason…to make the house more appealing. They also have trouble sometimes selling great homes because hoarders or messy people live there. Look beyond the grit, or beyond the flash.
- Think about maintenance. A place with a huge backyard might *seem* awesome…until you are mowing all day every Saturday just to keep up. Things to consider – long driveways (plowing in winter), big back yards (mowing/trimming), etc…
These are just a few tips for a newbie, but a lot of things come from experience also. If you have a friend in real estate, or know an experienced investor – take them with you when looking for homes – they’ll often point out things you wouldn’t have seen otherwise.