Are you trying to decide if you’re ready to buy a house? Whether your goal is to purchase a home for your full-time or vacation residence, or to make the first steps toward building an income from investing in real estate, there are two sets of questions to ask yourself before you commit:
- Are you ready for a lifestyle commitment?
- Are you ready for a financial commitment?
Lifestyle Factor #1: Committed to Maintenance?
Buying a house is an investment: its value may go up, or it may not. But unlike many other investments you could make (like stocks or bonds, where management is out of your control), how you maintain and manage this one, month in and month out, has a big impact on its value.
Maintenance is a necessity. You’ll either have to put in the DIY muscle to keep the house’s systems and structure up to par, or you’ll have to pay others to help you. Either way, ask yourself if you’re ready to commit to the ongoing investment of time and money necessary to help your house retain maximum value. In general, each year you’ll need to allocate 3-5% of the home’s value for maintenance.
Are you ready to dedicate weekends and evenings to upkeep? To put discretionary income toward paying for repairs and maintenance, rather than travel, entertainment, hobbies, or additional education? If not, you’re probably not ready to buy a house… yet.
If you’re looking forward to added responsibility, that’s one vote for “ready to buy.” Next:
Lifestyle Factor #2: Ready to Tie Yourself Down for 5+ Years?
It’s going to take time to recoup your big investment. Consider all the expenses associated with taking ownership: closing costs, inspection, down payment, insurance, moving, new furniture and fixtures, renovations or upgrades to make it yours, or bring it up to optimal market value.
A good rule of thumb is to be prepared to keep the property for 5 years if you hope to get that money back.
Is your job and career stable—and/or are you likely to be reassigned? Do you love where you live, or are you still exploring? If graduate school is in your future, will you go local? Do you have aging parents or other family members far away who are likely to need your help?
If big question marks like these are hovering, you may not be ready to buy a house right now.
If a move seems highly unlikely, you may be getting closer to buying readiness. Next week we’ll look at Part 2 of being ready to buy a house: the Financial Factors. And in the meantime, take a look how we help buyers — and download our complete Buyer’s Guide below.