I’ve heard a couple of girlfriends say that they’re not buying a home because they can’t find one they like. They prefer to rent until they can save enough money to buy a home with all the bells and whistles. If I heard it from a couple of my girlfriends then there are probably a whole lot more of you out there who feel the same way. There may be reasons when buying real estate doesn’t make sense, which I’ll save for another blog post. But if you are in the market to buy, I’m here to tell you to buy that home even if it’s not perfect.
Just like it’s difficult finding the perfect mate, it’s difficult finding the perfect home. Especially in more desirable neighborhoods, where home prices are higher, it takes time and money to find the right home in the ideal neighborhood. In most cases, we have to compromise on either a renovated home or the right neighborhood. But if you’re waiting to save money to buy a perfect home, then you’re missing out on a valuable opportunity to grow your wealth.
Let me put it in perspective for you. Here are several ways buying a home can grow your wealth:
- Building equity: As you pay off your mortgage, you begin to build equity. Equity = money in your pocket.
- Home increases in value: As you build equity, your home is also increasing in value. Bonus! According to Zillow, home values in Los Angeles have gone up by 7.9% over the past year and they predict they will rise 2.6% within the next year.
- Tax benefits: As a single person living in California, do you about fall out of your chair when you see how much of your salary goes towards taxes? Chances are that taxes will only go up over time. If you are one of those that don’t think taxes will increase in the future, then let’s hope you’re right. But in the meantime, I’m taking advantage of all the tax savings possible. As patriotic as it is to pay taxes, you will most likely need money for retirement or other important expenses, so those tax savings could really add up. Talk to your accountant about how purchasing a house may help you save on taxes.
- Renovate your home: So you “settle” for a home that’s not as nice as the rental you were living in, but this is a chance to make this the home you envisioned, which may also increase your home’s value. Make sure the home has a solid foundation and is in a neighborhood that you can live in for at least 5 years. See more about 5-year Rule below.
If you buy while home prices are still affordable, the value of your home will appreciate overtime. You can trade up for a bigger home or a home in a better neighborhood using the home’s appreciation and the equity you’ve built. Even if your home doesn’t increase in value, you’re still building equity. Many people adhere to the 5-year Rule when owning real estate to make closing costs worthwhile.
As home prices and interest rates rise, you’ll have to put a larger down payment for the same home. Don’t work harder than you have to. And don’t wait until real estate is expensive. It’s easy to get priced out of the more desirable neighborhoods as prices increase.
I’m not encouraging you to buy a home in an unsafe neighborhood if you’re a single woman living by herself, but with a little research I’m sure you’ll find plenty of neighborhoods that are safe and still affordable. Keep your options open. If you had the idea of living in an upscale neighborhood and you can’t find anything you like in those neighborhoods, consider expanding your search outside those neighborhoods. Write down what you like about those neighborhoods and see if you can find those attributes in a different neighborhood you may not even considered. If you’re in LA, here are some ideas to get you thinking outside the box. Check sites like Curbed, Time Out, or your local newspapers for ideas.
Don’t sit on the sidelines trying to save for the perfect home. Just start somewhere.