Published on September 27th, 2017
Choosing the right starter home for right nowVery few of us can afford to buy our dream home right out of the starting blocks. Thus the concept of the ‘starter home’. Starter homes are bought by people who intend living in them for only a few years while their finances improve enough to buy a larger house. Young couples, especially, may get a foot on the housing ladder this way and then upgrade when they’re ready to start a family and need more space. With the housing market experiencing strong growth over many years, there are significant financial advantages to home ownership that can help you get that dream home faster than if you rent.
Just because a starter home isn’t your home for life, though, doesn’t mean you don’t want it to be nice. Here are our best tips for finding the right home for right now.
1. Think low maintenance
If your intention is to live in the starter house for a few years while saving for something bigger or in a better location, you’ll want the running costs to be low. An older house may mean higher maintenance costs, which will swallow up that Dream House savings account in the blink of an eye. A smaller property in tip top condition will let you keep any extra money aside – and as a bonus, help free up your weekends for socialising! Remember, no matter the age of the property, it’s always a good idea to get a building inspection prior to signing the contract so you avoid any expensive surprises down the track.
2. Think five years ahead
Buying and selling houses can be expensive. Stamp duty, marketing fees, agent’s commissions and removals costs add up and take a chunk out of any profit you might have realised. Therefore, while a sitter home is a great way to start building wealth, do choose somewhere that you can see yourself living in for at least the next five years. Why five years? That’s the time frame in which, generally speaking, homeowners break even from the original purchase costs and start to see a profit.
3. Think contingency plans
You might be intending to wait another ten years before having children, but life sometimes has other plans in store. While smaller homes have a lot of advantages as starter homes, do consider buying something that has at least a second bedroom or space to expand.
While most people buy as much house as they can afford, it’s more prudent to lower your expectations and leave a margin for error. That’s not always possible, but when it is it will give you significant wiggle room should one of you lose their job or you need to pay for childcare. And whatever size your mortgage, take advantage of low interest rates and overpay it where you can to build a financial cushion against the future.
4. Remember your exit strategy
Since you’re buying with the intention of selling again in a few years, think like an investor to maximise your resale value. Choose a home in a location that’s experiencing growth or consistent high demand. Think, too, about whether you do intend to sell it. Many people decide to rent out their first house when they buy their second one, setting themselves up for a wealth building strategy from the start. That decision might have tax implications down the track if you do decide to sell, so make sure you consult a tax professional before taking the leap.