Bargain home purchases. Own your home, don't let your home own you. Discover ways to maximize your home purchase and minimize your payments.
A home purchase is probably the largest debt one incurs over a lifetime. In today's environment with spiraling home costs, it often seems an impossible dream for those wishing to purchase a first home. The clapboard bungalow with white picket fence has been updated to a modern Victorian on large lot with amenities such as sauna, double garage, in-ground pool, etc. There are alternatives in this fast-paced let's-have-it-now-and-pay-later society that will not overburden us with debt. Often overlooked, these choices provide viable ways to buy homes without sinking under the weight of sizable mortgage payments.
Consider a two-family house-—rent out a half and live in the other. Depending on the availability of suitable rentals in the area, rent might go farther than providing a positive cash flow on half a house. Rent received over the amount of the required expenses should be set aside for future repairs or improvements; if the amount becomes significant, it’s often possible to prepay principal on the mortgage.
These houses are not always socially fashionable but consider your ultimate goal, not today's trends. Always have a written rental or lease agreement, a security deposit of no less than one month's rent, plus written rules on what is or is not allowed. One caution: do not rent to family or close friends. If you feel you must, handle it as "strictly business" with written agreement, deposit and rules in place.
A lesser bargain, but still one with great financial potential, is a house that includes a rental unit. Often advertised as a "mother-in-law apartment," the rental income from a small unit may be sufficient to offset other monetary restrictions. Again, have everything in writing.
Another choice for a less expensive home is a house that can be expanded as needs and family size increase. One or two-bedrooms or one-bath houses are low in resale value and often available at bargain prices. Look at the structure's potential for adding bedrooms, baths, a family room. Consider a basement or attic that might be finished into living quarters, or a house whose roof could be raised for additional space. Check local building codes to be certain expansion is allowed. Look at the neighborhood and determine if increasing the size and value of a smaller home will make the house overpriced for the area should you need to sell. If these considerations don't present major obstacles, go for it and obtain cash when expansion is needed by refinancing. Monthly payments will increase but income should be escalating along the same lines.
Another bargain option is a fix-up house. These houses will sell for much less than their potential value, and wise improvements can quickly raise the resale value. There are couples who make a business of buying, improving and selling homes; many are very successful in the endeavor.
There are two types of fix-up homes: those that need updating improvements (modern fixtures, better storm windows, floors refinished or carpeted) and those still structurally sound but in need of major renovations (new roofs, new plumbing, rewiring). Enter into the purchase of a fix-up house only after careful consideration and research. If you are not a handyperson, forget it unless the price of needed improvements is less than the potential value. If you have limited skills (painting, papering, decorating, landscaping), consider your time and cost plus outside expenses, compared to the ultimate value of the property. Should you be semiskilled (rudimentary plumbing, electrical, structural work), consider more seriously but still with your eye firmly on the cost vs. eventual value.
Skilled handypersons are better able to undertake a fix-up home but still need to consider the constraints on time; a home improvement project may be more time-consuming than is manageable. In making the assessment on whether to buy a house needing improvements, do not rely on friends or relatives to assist with repairs. Volunteer helpers have a habit of disappearing when the job is scheduled. Make all decisions based on your ability to do the work yourself or hire it out. If you don't see this as a possibility, forget the entire scheme.
A final consideration for a low-cost purchase is a modular or factory built home. These are often better built than ones constructed on-site and called “stick-built” in the trade. There is usually a saving, even after costs of land, foundation, utilities and site improvement. Manufactured homes can fulfill the dream of a brand new home, with a choice of floor plans, interiors, appliances, etc. Most are sold as turnkey homes but some can be purchased with less than final finish, decreasing initial investment. Check local ordinances carefully because many localities have regulations prohibiting "mobile" or "manufactured" homes. The factory built homes are not mobile but laws governing home construction can be worded in such a way they may be viewed as such and some areas have banned manufactured and factory-built structures as well.
These alternative home purchase possibilities are not routinely featured in real estate advertisements. You’ll need to do much of the legwork and research on the purchase yourself, but the result can be rewarding if you are not strapped into a mortgage with unwieldy payments.
The greatest interest in these bargain purchases might be from first-time homebuyers but others needing or wanting to relocate might also consider the alternatives. Look at the statistics on median home prices in the area of your choice. By definition, remember that of all the houses in the equation, half were sold at less than the median price, the other half were sold at more. Is it what you can comfortably afford or should you consider an alternative?
Unfortunately, there are many families in our country today who do not own their homes; their homes own them. Try not to be one of the unfortunates.
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