Are you looking to buy your primary home, but you’re not entirely sure if it’s the right move for you? Today we’re going to talk about three key items that you should consider before you buy a house, to decide whether that’s truly the right move for you.
A lot of people have come across that dilemma, and you’re not entirely sure whether that’s truly the right move for you. You probably heard your parents or some of your friends saying, “Yes, but if you buy a house or an apartment for you, ultimately it will be an asset and it will be your investment”, but is it truly an asset? Is it truly going to be your investment? Or are you going to wind up being house poor if you choose to go down that route?
Let’s talk about those three key points. But first you need to know the concept of assets.
An asset it’s something that pays by itself. You don’t really need to work for it. It’s something that you can just leave there and it can just cover the debt. For example, any rentals that you have. You purchase a home, you have a mortgage, but you know what? The rental income that you get out of it, it’s going to cover the mortgage and a lot more. Eventually, hopefully if you did it right, will also cash-flow.
What is a liability? A liability is something that you have to work for. Why is that? It’s just plain and simple. If you don’t work, if you don’t break a sweat, you won’t be able to afford it. For example, a car. You purchase a car, and you have your monthly quotas that you have to pay. The minute that you stop working, or that you create an income, then you won’t be able to afford that car.
The three key points to buy a house
Let’s dive into the three key things that you need to consider, or that you should consider when it comes to buying your primary home.
- Your plans in life
- Property management
- Finances
If you have a property and you rent it, then you’ll basically be there for as long as the lease is good for, whether it’s month to month, or whether it’s actually a six month deal or a one month deal. In a way, you can consider that to be no strings attached. If you don’t like it, you can move on. If you like it, you will always have that flexibility to renew the lease.
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In the event that you choose to buy a house, something that you need to consider about your future, what is it that you really want to do in life? People may have different reasons like they see themselves living in a certain place forever. Others, because that’s the neighborhood they grew up in and they love it.
If you’re not entirely sure, because you have a job that is very demanding. Sometimes you will need to travel back and forth from one place to another, or that maybe you could be stationed two, three years at a time in one place, and then you will wind up in another. The key question here is, should you buy a property if you are in that situation? Let’s say you buy, and in the end you have to move out. Then you have to make a decision. If you purchase, then you’re going to have to decide If you really want to sell that property or do you want to rent that property?
If you do decide to rent, then you need to ask yourself “Do I really have the time to deal with a rental?” Even if you don’t deal with the tenant yourself, because you hired a property manager, you will still have to deal with the property manager.
Buy a house: How this decision impacts you
You’re going to have to probably cover some of the utilities, or you perhaps still have a mortgage to pay. How does that impact you in the future if you want to buy again, if you still have a mortgage in place today? Those are all of the things that you should consider.
The second thing to consider, it’s property management. If you rent, it’s fairly simple. If something breaks, all you’ve got to do is just to call your property manager because that person will be doing everything for you. They will find somebody who can come and fix it. They’ll do the diagnosis. All you’ve got to do is just to pick up the phone and call. In terms of management, when you’re renting, it’s easy, but when you are a homeowner, then it becomes a little bit more complicated.
If you’re a homeowner and you have an apartment complex. The process is pretty similar. If something breaks, all you’ve got to do is just to call the property manager and they will give you a diagnosis of what could happen or what’s going on. They can fix it for you, but then the cost of fixing it could come out of your pocket, or maybe not, depending on the type of apartment that you live in.
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If you live in a house everything becomes a lot more independent. You have your own space, but everything else is going to fall on you. If something breaks around the house, you are going to have to be the person deciding or doing the diagnosis of what’s going on. What exactly broke in this house? Some problems are very easy to fix like a window broke or the doorknob.
Should you buy a house? – The key question
The key question that you need to ask here is this: “Do I have time to do this?” Perhaps you’re a full time worker. Perhaps over the weekend, you also have a part time gig because you’re trying to save some more money to do other stuff. Do you really have time to worry about something like that when it can just be easily fixed with a rental? That’s an important thing to consider.
In terms of finances, that’s where people make their decision or base their decision on at the most.
That’s essentially how you have to make the analysis on the opportunity costs. What will be more beneficial for you? Did you consider any of these factors before?
Did you consider maybe not buying because you weren’t really sure if you want to stay in a certain place for a long time, or is it because you just simply didn’t want to deal with the management of properties? You have other responsibilities, or was it more because of your finances? All these questions are part of the analysis and you need to take steps towards those answers.
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