A starter home is the first home you buy but may outgrow. Most people buying starter homes do so to avoid paying rent. It is an excellent opportunity to save up for your forever home. At times people don’t outgrow their starter homes and end up making them their forever homes. They are small and cheaper than forever homes. They meet the immediate needs of the buyer.
People are often undecided when buying a house for the first time. Deciding to settle for a starter home or continue saving up for a forever home is not easy.
Starter homes are cheaper than the average houses in the area. These may include condominiums, townhouses, stand-alone small houses, upper fixers, and houses in less desirable locations. Young newlywed couples, recently employed youth, and young families prefer these dwellings.
Benefits of buying a starter home
The main benefit of buying a starter home is that it allows you to build up mortgage equity and save for the future. After a while, you may be able to earn money from your starter home by renting it out or selling it for a higher price. You can also cash in the equity and use it to buy your forever home. The prices for starter homes may also appreciate over time, depending on their location. When you are selling, you may sell it at a higher price than you bought it.
Starter homes are cheaper and more affordable than forever homes. The low utility bills and property taxes are easy to pay and won’t leave you drowning in debt. They are easy to maintain.
When you finally feel like you have saved up enough money for your forever home, you may sell it or rent it out. Starter homes are hot on the market and are a popular choice for first-time buyers.
Disadvantages of buying a starter home
Starter homes, especially those owned by young families, can be quickly outgrown. Buying a home is an expensive and tedious task. It is also very time-consuming. At times you may discover that renting in some areas is cheaper than buying in others.
Buying a house also comes with extra costs like property taxes, maintenance, and insurance. You may want to continue renting while investing and saving up for your forever home. You will also have to pay a local moving company to shift your place.
Factors to consider before buying a starter home
You may want to buy a home, but it is way out of your budget. It would be best if you did some research and calculations. Analyze your income, current debts, location of the property, and settle on an amount that you are willing to spend on your home.
Weigh these against the location of the property, down payment, homeowner insurance, and property taxes. Other costs to are maintenance and repair (upper fixers), utility bills, and transportation costs.
If you are moving to another place, you can always consult with a local moving company or friends from that area. They always have the best knowledge of the prevailing market rates and the best terms.
- Current needs
You may be working from home and having no kids, so living in the suburbs with little social amenities may not be a problem for you. There is also a scenario where you need to live near your workplace and have kids who need to go to good schools. These will significantly affect your decision to move into a starter home.
- Plans for the future and stability
It is not a good idea to buy a starter home if your job involves unpredictable transfers. It may also not be good when you are trying to start a family. Your family may outgrow the starter home very fast, or your employer may relocate you sooner than expected. It means you’ll have to sell at a loss and have capital gains debt.
Once you know you can manage to buy and maintain your house, you need to make a detailed plan. Buy a home while planning for the future. You have to plan whether you’ll want to sell or rent it out, when you will sell it, and how appealing the neighborhood is to future potential buyers.
Make sure to check and analyze the condition of the house before buying. Check that the repair costs will not exceed your budget and that the house is in good condition. Your home may not have everything you need, but you can improve it to suit your needs.