Over the past few weeks, we’ve had several comments and questions (on the blog and on my personal email) about purchasing a single family residence.
In the past, I’ve made my position clear. To summarize, I encourage everyone to think long and hard about taking on a mortgage for a piece of property that doesn’t generate an income.
Let’s itemize the issues and considerations that a potential new home buyer should take into account prior to buying a single family residence to live in:
First, why do you want to buy a home? Will it give you a sense of security? A sense of accomplishment? Is it a dream come true? In reality, it’s none of these. It’s an obligation, even if you pay cash for it, because you have to maintain it and pay attention to it, long after the fairy tale has disappeared.
Second, the down payment. Do you have it? Is it all you have in liquid cash? Is someone else going to give it to you or loan it to you? Is it money you might need for a child’s college education? An emergency? Is it money you could invest?
Third, the mortgage payments. Can you make them every month? What happens if you lose your job or can’t work? Do you have more than one source of income? How long can you make your mortgage payments without getting up every morning and going to work?
Fourth, property taxes, insurance, repairs, and maintenance. Do you have realistic figures on these? Let’s say you want to buy a $1,000,000 home. Do you know someone who owns a $1,000.000? Ask them what it costs to maintain. Suggestion: be seated when they tell you, and have a strong cocktail close at hand. You’ll need it.
Fifth, consider the obligation. What if a great career opportunity comes up in another state or country? Can you pick up and go quickly to take advantage of it? Owning a home complicates that.
Sixth, can you bet on home prices increasing? Until 2007, everybody would have said yes. It’s a new world.
Finally, I’d like to hear everyone’s thoughts, formulas, and experiences regarding what to consider and how to know if you’re ready and able to buy a single family residence.
I know it would be helpful. Thanks in advance.