Charles Holmes talks here about the advantages of Buying a Home over Renting. In addition, for first time buyers, he gives some tips that will help to find your dream home. Finally, he talks about the characteristics you need to pay attention to when looking for properties by yourself.
This is part of last week’s video presentation made by Charles Holmes. You can listen to the full video here.
Buying or renting a home?
I recommend you buy a home and not just because I’m in real estate. If you look through history, people who have accumulated wealth and held wealth for long periods of time have done so by owning real estate and often by developing real estate.
Primarily, if you have an option between renting the space you live in or owning a space where you actually have some investment in it, owning seems like it’s best. The logical thing to do, if you can afford it, is to buy a home.
Second, think about what happens when you buy. You put money down. Let’s say you buy a home for $100,000 – not in Seattle, but somewhere. They will probably require you to make a 20% down payment ($20,000), but your investment would be increasing based on the entire $100,000. Instead of having $20,000 invested somewhere and making $2,000 when it goes up 10% for example, you would make $10,000 because your investment is $100,000. Five times as much just by having that investment.
Third, the value of your home will never go to zero. If you invest in things like stock, they can always go to zero for various reasons such as the company going broke. If the market goes bad, stock can fall and continue to fall until it gets down to zero. Property never falls to zero. Property always has value, even if the market collapses, because property has a utilitarian value.
If the economy completely collapses and we have no money you can still rent it out for services or in exchange for services. I might let you live in my home for coming over and doing things at my house, such as cutting my grass, painting my house, taking care of my children, etc. There’s always a utilitarian value in owning real estate.
After you decide to buy
The next thing you want to do after that decision is to find a really good lender. You can find yourself a lender at your own credit union or bank. Someone you know and trust. They’re experts in the lending field and they’ll have or know of programs, federal programs, state programs, that can help you.
For instance, you can get a Veteran Administration loan for 0% down. Some first-time home buyer programs have a very low entry point as well.
Another benefit of working with a lender is that when you have that pre-approval statement from the lender that says we’ve looked at your financials, everything is in order and we can approve you for this much money, then when you go out to make an offer on a home with an agent, that puts you in a much better position.
Financed money is actually as good as cash other than the fact that cash is quicker. So if you do a cash deal you can usually close the transaction in 10 days. If you borrow money it can take as much as 30 days. However, if you make a financed offer for a property and someone else offers cash, but their offer is much lower than yours a logical property owner, a seller, is going to say well I’d rather wait an extra 20 days and get that extra $20,000.
Where to buy?
Then, once you have determined how much money they will lend you, that will help you determine what area or neighborhood is more probable for you to get what you are looking for.
If you don’t have an agent that you’re working with, I recommend that you go to neighborhoods and you drive around and you see what feels comfortable to you, what feels like a good neighborhood. Go to the local grocery store and see who’s shopping there. These are going to be your neighbors. Maybe they are the trendy hip people or the more laid back family people or older people who have no children and they’re retired and maybe you want to live in that community.
So whatever your lifestyle is whether it’s in the country because you want to raise horses or in town because you want to be able to walk to cafes, that helps you select your neighborhood.
Choose the Correct Agent
Once you know the bank’s limitation on how much you can borrow and you’ve found the neighborhood that’s got the right vibe for you where you feel at home, then I recommend that you go to Open Houses in the neighborhood. Every weekend there will be properties for sale with open houses. You can find those on Zillow, Redfin or our website . You can just click on a neighborhood and it’ll show you which properties are having open houses.
When you go to the open house, there will always be a broker there. You can go and meet the broker and see if they’re the tough dashing fast paced numbers-only person you want to deal with or someone more laid back with an easy going personality and that’s who you prefer to deal with.
When you feel like you can relate to the broker or you have a good rapport with them, then you can ask that broker to help you find a home. The good thing about having a buyer’s agent, especially at this point in time and this may change in the near future, is that those services are free to you. They are paid by commission on the sale of property and that happens at the end of closing a transaction and the seller actually pays, because the money comes out of the seller’s money to pay for the buyer’s agent. It is of no cost to you at this point, although like I said that might change in the future.
If you’re looking for a property yourself
- You want to be central in a good neighborhood not on its edge. Remember the axiom: location, location, location.
- In this part of the country, in Seattle, it’s important to think about southern exposure. In the winter, you won’t get any sunlight if you’re on the north side of a hill. Same as when there’s a home on the south side of yours that’s taller or has big trees.
It’s best if you can have the street or an open space on that side and if your house is running east and west so the broad side of the house is on the south side. Then, it gets sunlight in all the windows.
If you’re in the right neighborhood and the right lot, the house is not as important as those other things. The reason: you can change the house but you can’t change those other things.
- Always it’s good to hire a professional home inspector before you buy a house. So they can come out and look at the whole thing. However, you may be able to check off some properties immediately just with a few simple things.
- Make sure it has a good foundation. When you walk around the house, look for cracks, big cracks. Some small cracks may be natural from settling.
- Look for foundation cracks. See if the floors look level when you walk through the house. If you drop a ball, would it roll into a corner or does the floor look really flat and sturdy.
- The roof is the next most important component because the roof keeps the water out. If you get water in the house it’s just bad all the way around. Water causes settling, water cause mold, water just causes bad things in your home.
Right now is a great time to buy because interest rates are really low. I remember when they were 17% and now they’re between 3.5 to 4.0%. If you have any questions or you just want to talk, send us an email or give us a call. Also, as I said before, you can find a local agent at one of your local open houses.