Monday, 7 September 2020

Should You Buy A House Or Rent?_ What You Need To Know


When should you buy a house? That's what we're going to be talking about in this article, and to give you some insights and perspectives on how to position yourself or if you're in the position to purchase your first real estate property or maybe your second or third, depending on where you are in life, and what you're doing. Right now, there's a lot of talks out there about buying a house, you know, when you're renting, you're just literally throwing money away. And there are a few considerations that should come to mind for you before you buy that house.



1. Is Your Income Stable?

Recently, I was listening to this guy who bought his first house in literally 30 days after he bought the first house he lost his job, he called into the Dave Ramsey show. So some of the things that should go into buying a house if you're going to get a mortgage, is your income stable? Is it going to be stable for the next 10 years? This is something you need to take into consideration


2. Do You Have Enough Money?

There are many people who are not financially in a position to buy a house, because a house has a lot that comes with it. You have maintenance, you have taxes, you have insurance. So getting this house with this low mortgage is just part of the pitcher. So you should have some reserves.


3. Is It Going To Be In Your Best Interest To Buy A House?

There are some people who are stable, who have a stable lifestyle, who have stable incomes, and it's a good idea for them to buy a house. But if you are a person who is like a freelancer, you have interruptions in your income, you're just better off renting. Because you also hear that there are many people who lose money for buying houses.


I'm about to give you some numbers.


I was looking at a house that recently sold in my neighborhood and this house sold for $550,000 in 2016, and here it is 2020 the house is selling for $6,75,000. And they renovated the house. I don't know what the renovations are but the renovations look to be extensive, they could have spent $30,000 to $40,000 for renovating the house. Where they're only going to make maybe $50,000 on the house after living in it for 4-years, which to me that's not a lot of money, but once again, you have to look into a house because many people buy a house and they think a house is an investment. If you are living in that house is not an investment.


How do we turn this house into an investment?


You move out of it and you put a renter in it and you start cash flowing. At that point, the house becomes an investment. But there are many many things you need to look at when you're buying a house. And also, if you're in like, new york, California, I know people who make six figures who live in new york and California, and they cannot afford to buy real estate.


4. Am I Going To Stay In This House For 5 To 10 Years?

If you get into a house and then you sell it, the cost of selling a house could actually put you in the negative. Essentially, this is how it works, because many people talk about going out and getting your mortgage because the mortgage rates are so low. But over the years, depending upon the price of your house, let's say that your house is $150,000, and you take out a 30-year mortgage. Do you know you can pay $250,000 even with a really low-interest rate? So even with these low-interest rates, you are still paying way more for the house unless the house dramatically appreciates.


Also, another thing you need to look at is your lifestyle. Are you a person who is suited to have a house because having a house it's a lot of upkeep. You got the land, you've got little things that go wrong, you had to call a plumber. etc


5. Buying Houses In Certain Zip Codes Are Not Good Investment. 

Because you buy a house and you sell it and the house doesn't really appreciate, because I'm going to tell you, the more expensive the house is, the less the appreciation unless you're someplace like California and new york. I live in a really nice neighborhood we have multiple multi-million dollar homes and I've been doing some research and one of the things I've seen is that frequently these houses don't sell for much more, they don't resell for much more than they sold for. I see this time and time again. This is how I got a deal on my house because they were having a hard time selling it. so you have to be really really careful because if you're going to buy a house, you need to do your research, and you need to know your market, and you need to have an exit strategy.


If you buy this house because this is one of the things that seems to happen quite frequently to people who have jobs that they will buy a house and then their company will transfer them somewhere so they now have to put their house on the market which could be early. A lot of times I've seen people go ahead and buy, and rent the house so they don't have to put it on the market. Because there are so many things that go into it because depending upon your lifestyle, and depending upon how much money you make, you may be better off renting than buying. And I know that's going to sound really strange because you always hear like buy a house, buy a house, buy a house. Also, you should not buy a house if you're planning on moving in two years, you shouldn't buy a house if you're planning on changing jobs, you shouldn't plan to buy a house based upon how you live your life. There are so many things that go into it because everyone is like to buy some real estate, get a house.


let's talk about the credit situation 


Right now, during the pandemic, if you're trying to buy a house you're going to have to have good credit. You're going to have to be in the 700s and you're going to need to have a down payment. So if your credit is bad, this is actually one of the worst times in America to buy a house because you're gonna have a hard time, you're going to pay a substantially higher interest rate.



Let's go through the checklist of things that you should be doing 


  1. Check Your Lifestyle: Am I going to be in area five or ten years?
  2. Is My Income Secured?
  3. Do I Have Good Credit?
  4. After The Down Payment, Will I Still Have Money In The Bank Check?


6. Am I In A Position To Get What I Want?

There are many people who are looking for houses that end up buying some stuff that they really don't want. A lot of people will ask and say, hey, I'm moving to Atlanta where should I buy my house? And I was like, you should rent for a year. Why? Because that gives you enough time to come to Atlanta, figure out where you want to live, what works for you because there are so many houses, there are so many things are going on, essentially, you can move here, and buy a house sight unseen and then later on after you're locked into that house, you'll see better deals. Because I saw this the other day there was this house for sale that was like 5000 square feet, it was only for $335,000 which is really cheap for a house that big. You know this is one of the things that you have to look at. When you're buying a house, you should also buy a house that is within your means. This is one of the things that keep people poor, they buy too much house. Meaning, their mortgage is too big. After they're paying their mortgage, after they pay their car note, they're broke. This is one of the things so you should not buy more house than you need for your budget. You should buy a house that fits well within your budget, and if you don't see anything that you don't like, that you like, you should save more money so you can put a bigger down payment down so you can get what you want. 


Once you run the numbers, once you look at your income, once you look at your lifestyle, and also, ask yourself, do you want to be in the situation where you got to be responsible for a house? Being responsible for a house means you got to worry about the taxes, you got to worry about getting the grass cut, you got to worry about little maintenance issues, there's always something that's going on. And also, you should do your research, and also when you buy your first house you should be looking for deals. You should get the best bang for your buck because essentially this is going to be the most expensive purchase you will make in your life and it's going to be substantial and it's going to take a lot of money and it's going to be a very huge commitment.


7. Buy A Bouse Based On One Income Not Both Of Your Income

I recommend that if you are married that you buy a house based on one income not both of your income. I know that isn't popular, but see, if you buy a house based upon your income this is how you end up getting too much house and this is how you can get in trouble because if you buy a house based upon both of your incomes then one of you loses your job or in the case of many couples you start having babies and you get to baby number two, baby number three, the daycare is like $3,000 to $4,000 a month. It makes more sense for her to stay home than to work, and now you're saddled with this extra-large mortgage for one that was based upon two, but now only one income is going to support that mortgage. So this is just a lot of things that you should think about.


8. When You're Going For Your First House, You Should Go With A Wish List

You should sit down and think about what do you want in the house? For example, I needed a two-car garage, I needed a finished basement, I needed x amount of room, and so on. When you start to go for houses with a wish list which in objectives, then you're going to be much more satisfied when you get into that house because there are many people who buy houses and they get into it then six months later they wish they haven't bought that house. This is a big issue because houses are illiquid, they're hard to move, essentially, you got to get a real estate agent, you got to list it, you got to put it in the market, you got to show the house, you got to be clean, and it's not as liquid as stock.








Conclusion

This is some things that you should think about if you're going to buy a house, and also, if you're in the position to buy a house because if you have a lot of debt, you have little income, you've got instability in your life, or you're going through a divorce or something this may not be the best time for you to purchase a house, and you would be better off renting. And if you're a person that likes the freshness of moving every two to three years you're better off renting than buying a house. So that's all I've got for you.

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